Despite the solid economic recovery and better fiscal performance in 2021 highlighted by the rating firm Moody’s for the Dominican Republic, the agency indicated in a recent report that the country’s fiscal position is weak relative to its rating peers, with an interest rate/revenue rate of 20% in 2021, more than double the average ratio of the countries with a Ba rating of 9.3%.
The international rating Moody’s The day before yesterday, it published its annual credit analysis report for the Dominican Republic, highlighting the sovereign rating of Ba3 and its stable outlook, which was ratified last April.
He emphasized the real growth of the Dominican economy of 12.3% in 2021, a level that was “significantly above regional and risk rating peers.”
However, the firm indicated that the low affordability of the country’s debt is due to high interest payments (3.1% of GDP in 2021 vs. 2.0% for median Ba) and very low income (14% of GDP in 2021). average between 2010 and 2019 compared to 26% of GDP for the median Ba), “which stems from a narrow tax base and large tax exemptions and loopholes that benefit the most dynamic sectors of the economy, including tourism”.
Without taking major steps to implement lasting reforms that improve government revenue collection, the sovereign’s credit profile risks weakening as economic growth moderates.
He noted that the country’s credit profile could face upward pressure if there were a significant improvement in debt metrics in general and debt affordability indicators in particular. He considered that a significant decrease in the government’s balance sheet exposure to foreign currency-denominated debt or the implementation of fiscal reforms that support and improve the outlook for debt sustainability could also lead to an improvement.
