The expenses not contemplated when the budget for this 2022 was formulated, such as fuel subsidies to freeze them for four months and certain agricultural products, the temporary dismantling of tariffs on 67 food subheadings and the expansion of targeted subsidies, among others, lead to the Treasury to reestimate the total expenditure for this year at RD$1,129,888.3 million, equivalent to 18% of the gross domestic product (GDP), implying an increase of 8.0% with respect to the budgeted level.
Treasury recognizes that “the prevailing uncertainty in the international scene, characterized by the persistence of bottlenecks in the global supply chain and the escalation of the war between Russia and Ukraine, have led to inflationary trends in the prices of raw materials that they have generated great unforeseen budgetary pressures during the formulation process”.
Last week, the general director of Customs Eduardo Sanz Lovatón, indicated that the surplus in collections was for RD$32,000 million, an amount that has served to alleviate the economic burden that the Government has with the subsidy on fuels that some RD had consumed. $25 billion so far this year.
In contrast to the upward pressure on spending, the Treasury highlights in the document “Budget Policy for the fiscal year 2023” that, as of this July, collections “have been invigorated above expectations, reflecting the recovery of the economy in line with the policy measures adopted by the authorities”.
Among the elements that have had an impact, he cites the policies adopted to mitigate the coronavirus, the arrival of passengers for tourism purposes, the increase in remittances, foreign direct investment and foreign trade, among others, “which have compensated the international environment unfavorable”.
“Economic policies (fiscal prudence, temporary measures to mitigate commodity prices and tightening of monetary policy) remain adequate”
If the tax policy remains constant, and in line with domestic and international economic forecasts, by the end of the year revenues are expected to amount to RD$907,005.3 million, excluding donations of RD$1,989.6 million, a figure equivalent to 14.7% of GDP dear, says Treasury.
It projects that this income level would be 4.3% above what was initially budgeted, and 7.9% higher than what was collected in 2021. In addition, by the end of 2022, it anticipates a primary deficit of RD$36,976.0 million, equivalent to 0.6% of GDP, on par with a global deficit of RD$220,893.4 million, corresponding to 3.6% of GDP.
IMF praise, but alert
The Executive Board of the International Monetary Fund (IMF), which concluded the Article IV consultation with the Dominican Republic, among its considerations published yesterday, indicates that the outlook points to a continued recovery of the local economy, “although world events pose risks.”
“As for the risks,” says the IMF-, the war in Ukraine may have a larger-than-expected effect on growth and inflation global. The pandemic, although well contained in the Dominican Republic, may degrade growth in other regions. And the tightening of monetary policy in the United States may have a larger-than-expected impact on capital flows.”
He points out that local GDP growth would converge to its potential and the inflation it would return to the target range for next year as the impact of global shocks is reduced, in a context of financial stability and a solid external position.
The entity plans a inflation of consumer prices (end of the period) to 2023 of 4.5%; for this 2022 of 8%.
The IMF considers that “the economic policies adopted by the country (fiscal prudence, temporary measures to mitigate the prices of raw materials and tightening of monetary policy)” continue to be adequate “.
It adds that the use of temporary fiscal measures to contain the impact of commodity price shocks on domestic fuel and food prices “is appropriate”, as well as “continuing with the electricity sector reforms and improving the targeting of subsidies and social assistance”.