The multilateral affirms that the fall in exports from free zones and tourism will leave the country
with a greater gap in its balance of payments
The pandemic will cause the Dominican Republic to stop receiving some 6,000 million dollars this year with respect to what was initially planned. A projected drop in exports, remittances and tourism, which are the largest sources of foreign exchange for the country, will be responsible for the decline.
This was projected by the International Monetary Fund (IMF), according to the report prepared by the team that analyzed the country’s prospects in the face of the crisis generated by COVID-19, within the framework of the request by the government for a quick loan before that multilateral.
The urgent needs of the balance of payments in 2020 arise from a deterioration in tourism and commercial activities in the free zones, and a drop in the flow of capital, despite the fact that the historical reduction in oil prices compensates for some of those pressures ”, says the multilateral. The report indicates that exports, which were expected to reach $ 11,574 million this year, will actually end at $ 10,293 million, about $ 1,281 million less than originally planned for 2020.
For its part, with regard to services, within which tourism activity is located, the pre-COVID-19 scenario indicated that income would be in the order of $ 6.170 million, but the review made by the IMF In mid-April it indicates a projection well below this parameter: the multilateral estimates that in 2020 services will leave the country 3.174 billion dollars, a total of 2.96 billion less than expected.
Regarding primary income, the IMF forecast is also negative: the pre-COVID-19 scenario indicated that the Dominican economy would receive a total of $ 3.018 billion this year; instead, the new perspective points to revenues of $ 1.198 billion for this year, about $ 1.821 billion less than initially expected.
However, foreign direct investment will not fall as much as other income. The IMF estimates an inflow of money in this way of about 2.43 billion for this year, when the initial scenario pointed to about 2.75 billion dollars.
The data on which the IMF report is based were calculated by the multilateral with the information offered by the Dominican authorities as of April 17.
The balance of payments gap will not be wider thanks to the effect that the drop in oil prices will have on national accounts. The amount that the country must allocate to cover imports, of which a significant portion is represented by hydrocarbon purchases, will also fall this year.
The IMF estimates that in 2020 imports will yield up to about 19,021 million, from the 22,128 million that were initially projected, a drop that will alleviate pressures on the growing financing needs that the pandemic opens on fiscal accounts. This does not mean that the forecast of less money to cover imports is capable of closing the balance of payments gap for this year. In fact, it will be much deeper: the pre-COVID-19 scenario showed a balance of payments deficit of -1.4%, similar to that of the last two years. But the now real picture of a global economy affected by the pandemic shows a potential hole of -5.2% for this year.
“The pandemic has significantly deteriorated the Dominican Republic’s macroeconomic outlook for 2020 and has created financing needs that will require additional support,
highlights in the report.