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Artisan Canvas

Sailing Towards Reform

22 May 2024 |

EMsights Capital Group

Dominican Republic President Abinader cruised to re-election over the weekend, winning outright in the first round of voting and avoiding a run-off. While the polls heavily telegraphed the outcome in favor of Abinader, this reaffirms the country’s commitment to growth and development. The victory is sweetened by Abinader’s party winning a majority in congress, likely paving the way for three major reforms.

Abinader established himself as an effective, pro-investment, pro-business leader during his first term as president. He took office in 2020, amidst the depths of the COVID-19 pandemic, when the Dominican Republic's economy, heavily reliant on tourism, came to a virtual standstill. Under his administration, the nation was one of the fastest-growing countries in the region, attracted record levels of FDI, and maintained healthy public finances.

In this second Abinader administration, with the backing of congress, we anticipate three significant reforms to be implemented:

Fiscal Rule: This reform will aim to decrease the nation’s debt-to-GDP ratio to 40% by 2035 through tight management of revenue and expenditure.
Tax Reform: Elements of this reform may seek to broaden the narrow tax base by eliminating exemptions for certain sectors of the economy.
Electricity Reform: This reform will address long-standing weakness in the electricity sector. It may include governance improvements, enhancing the delivery of electricity services and reducing subsidies.

The election results mark a significant stride forward in the Dominican Republic’s ongoing development journey, and it is not going unnoticed by ratings agencies. The nation has been eyeing an investment grade rating for some time now, and the results of this election and anticipated reforms may be a key step towards unlocking that upgrade.

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