Dominican Republic’s economy needs a tax fix, IMF

Santo Domingo.- The International Monetary Fund (IMF) on Wednesday suggested that the Dominican government bolster the macroeconomy, confront the global economy’s risks and implement significant tax changes.

It forecast however that the economy will continue to grow at 4% this year and the next.

In a statement issued in Washington after the nine day visit by the mission led by Przemek Gajdeczka, the IMF said the government exceeded the projected the deficit of 2% of the GDP to 3.3%, in the first half of the year.

"The macroeconomic outlook for the near term is a challenge for the authorities, reflecting the need to strengthen the macroeconomic framework, including in particular to significantly adjust the fiscal position, and face the risks of the global economy,” the statement says.

The IMF’s visit sought toreview the economy and lay the groundwork for the Article IV consultation and the monitoring program.

The delegation members met with President Danilo Medina, senior officials, private sector representatives and labor union leaders.

Gajdeczka said the economy has slowed this year and inflation has declined, while fiscal and external positions remain weak.

The 3.8% growth in the first half was paced by agriculture, retail sales and tourism, while annual inflation to August was 2.2%, below 5.5% + / – 1% below the specified inflation target.

"The fiscal situation has deteriorated in the first half while the sale of the Dominican National Brewery boosted extraordinary revenue. Higher costs however, including electricity subsidies, led to a consolidated public sector deficit of 3.3% of GDP in June 2012 (compared with the annual target of around 2% of GDP in the original budget).