Economist Country Forecast Dr

Dominican Republic: Country Forecast Dominican Republic July 2010 Editor: Stephen Keppel Editorial closing date: July 7th 2010 Country Forecast July 2010 © The Economist Intelligence Unit Limited 2010 Dominican Republic: Five-year forecast summary Country Forecast July 2010 © The Economist Intelligence Unit Limited 2010 Dominican Republic: Five-year forecast summary The ruling Partido de la Liberación Dominicana (PLD) succeeded in expanding its legislative majority in the May 2010 legislative and municipal elections, and new election rules mean that the party will maintain this majority until 2016, enhancing political stability until at least the next presidential election in 2012 The Dominican Republic's business environment will continue to improve gradually during the forecast period, but the country will remain in the bottom third of the Economic Intelligence Unit’s global business environment rankings Dominican economic growth will continue to outpace growth in the US and many countries in Latin America, but the rate will be much slower in the forecast period (2010-14) at an annual average of just 4.5% compared with 7.4% average annual growth in 2005-09 Real GDP growth (%) Country Forecast July 2010 © The Economist Intelligence Unit Limited 2010 Dominican Republic: Five-year forecast summary The forecast for market opportunities is mixed GDP growth in US dollar terms was weak in 2009, and market opportunities will be restricted by the gradual recovery and the country’s small population and low income per head during the rest of the forecast period Prospects for long-term economic growth will be influenced by external factors and domestic policy reforms The Dominican Republic will struggle to overcome structural constraints in human and physical capital, as well as in its governance institutions However, assuming a continuation of generally cautious, market-oriented policies, the economy should expand steadily from 2012 Household consumption per head (US$) Country Forecast July 2010 © The Economist Intelligence Unit Limited 2010 Dominican Republic: Business environment rankings Methodology Country Forecast July 2010 © The Economist Intelligence Unit Limited 2010 Dominican Republic: The political environment Country Forecast July 2010 © The Economist Intelligence Unit Limited 2010 Dominican Republic: Political outlook Highlights The dominance of the ruling PLD should enhance political stability until at least 2012 while securing a moderate pro-business agenda throughout the forecast period Progress on energy sector and government efficiency reforms will be slow and piecemeal as weak institutional capacity and vested interests hold back progress The new constitution bans consecutive presidential re-election but allows for unlimited nonconsecutive re-elections, meaning that the president, Leonel Fernández, cannot run in 2012 but could return in 2016 As a result, the race for the presidency in 2012 is wide open and will be a significant source of political and social tension Both of the main political parties will struggle to select and appoint their presidential candidates in the run up to the 2012 election There are no clear successors within the PLD and the leadership battle could be contentious Within the opposition Partido Revolucionario Dominicano (PRD), Miguel Vargas Maldonado, the 2008 presidential candidate, is the current party leader, but he has lost some popularity owing to the PRD’s poor performance in mid-term elections and will face challenges from rivals At this point in time, a PLD candidate would be the most likely winner, if he receives the firm backing of the current president, Mr Fernández More from ViewsWire… Country Forecast July 2010 © The Economist Intelligence Unit Limited 2010 Dominican Republic: Demographics Country Forecast July 2010 © The Economist Intelligence Unit Limited 2010 Dominican Republic: Demographic outlook Population growth will be 1.4% per year during the forecast period, slightly slower than in 200408 Migration to the US and Spain will slow slightly, owing to the global economic crisis Remittances from workers abroad will continue to support the economy of the Dominican Republic, although remittance growth will be weaker in the forecast period than during 2004-08 The population of the Dominican Republic is still relatively young and the old-age dependency ratio will remain low Although improvements in education spending and attainment will continue in 2010-14, the quality of the labour force will still be undermined by low skills levels, and unemployment will remain in double digits Country Forecast July 2010 © The Economist Intelligence Unit Limited 2010 Dominican Republic: The business environment forecast Country Forecast July 2010 © The Economist Intelligence Unit Limited 2010 Dominican Republic: Map Country Forecast July 2010 © The Economist Intelligence Unit Limited 2010 Dominican Republic: Comparative GDP, 2009 Gross domestic product (US$ bn; market exchange rates) Country Forecast July 2010 Gross domestic product per head (US$; market exchange rates) © The Economist Intelligence Unit Limited 2010 Dominican Republic: Basic data Land area Population Climate Weather in Santo Domingo Language Currency Time Public holidays 48,511 sq km 9.3m (2007 Central Bank estimate) Subtropical Hottest month, August, 23-31°C (average daily minimum and maximum); coldest month, February, 19-28°C; driest month, March, 19 mm average rainfall; wettest month, June, 185 mm average rainfall Spanish peso (Ps)=100 centavos hours behind GMT January 1st, 6th, 21st and 26th; February 27th (Independence Day); Good Friday; May 1st; Corpus Christi; August 16th (Restoration Day); September 24th; November 6th (Constitution Day); December 25th Country Forecast July 2010 © The Economist Intelligence Unit Limited 2010 Dominicanenvironment Republic: rankings: Methodology Business Outline of the model The business rankings model measures the quality or attractiveness of the business environment in the 82 countries covered by Country Forecasts using a standard analytical framework It is designed to reflect the main criteria used by companies to formulate their global business strategies, and is based not only on historical conditions but also on expectations about conditions prevailing over the next five years This allows the Economist Intelligence Unit to utilise the regularity, depth and detail of its forecasting work to generate a unique set of forward-looking business environment rankings on a regional and global basis The business rankings model examines ten separate criteria or categories, covering the political environment, the macroeconomic environment, market opportunities, policy towards free enterprise and competition, policy towards foreign investment, foreign trade and exchange controls, taxes, financing, the labour market and infrastructure Each category contains a number of indicators that are assessed by the Economist Intelligence Unit for the last five years and the next five years The number of indicators in each category varies from five (foreign trade and exchange regimes) to 16 (infrastructure), and there are 91 indicators in total Almost half of the indicators are based on quantitative data (eg, GDP growth), and are mostly drawn from national and international statistical sources for the historical period (2005-09) and from Economist Intelligence Unit assessments for the forecast period (2010-14) The other indicators are qualitative in nature (eg, quality of the financial regulatory system), and are drawn from a range of data sources and business surveys adjusted by the Economist Intelligence Unit, for 2005-09 All forecasts for the qualitative indicators covering 2010-14 are based on Economist Intelligence Unit assessments The main sources used in the business rankings model include CIA, World Factbook; Economist Intelligence Unit, Country Risk Service, Country Finance, Country Commerce; Freedom House, Annual Survey of Political Rights and Civil Liberties; Heritage Foundation, Index of Economic Freedom; IMF, Annual Report on Foreign Exchange Restrictions; International Institute for Management Development, World Competitiveness Yearbook; International Labour Organisation, International Labour Statistics Yearbook; UN, Human Development Report; US Social Security Administration, Social Security Programs Throughout the World; World Bank, World Development Report; World Development Indicators; World Economic Forum, Global Competitiveness Report Back to Rankings Country Forecast July 2010 © The Economist Intelligence Unit Limited 2010 Dominicanenvironment Republic: rankings: Methodology Business Calculating the rankings The rankings are calculated in several stages First, each of the 91 indicators is scored on a scale from (very bad for business) to (very good for business) The aggregate category scores are derived on the basis of simple or weighted averages of the indicator scores within a given category These are then adjusted, on the basis of a linear transformation, to produce index values on a 1-10 scale An arithmetic average of the ten category index values is then calculated to yield the aggregate business environment score for each country, again on a 1-10 scale The use of equal weights for the categories to derive the overall score reflects in part the theoretical uncertainty about the relative importance of the primary determinants of investment Surveys of foreign direct investors' intentions yield widely differing results on the relative importance of different factors Weighted scores for individual categories based on correlation coefficients of recent foreign direct investment inflows not in any case produce overall results that are significantly different to those derived from a system based on equal weights For most quantitative indicators the data are arrayed in ascending or descending order and split into five bands (quintiles) The countries falling in the first quintile are assigned scores of 5, those falling in the second quintile score and so on The cut-off points between bands are based on the average of the raw indicator values for the top and bottom countries in adjacent quintiles The 2005-09 ranges are then used to derive 2010-14 scores This allows for intertemporal as well as cross-country comparisons of the indicator and category scores Measurement and grading issues The indices and rankings attempt to measure the average quality of the business environment over the entire historical or forecast period, not simply at the start or at the end of the period Thus in the forecast we assign an average grade to elements of the business environment over 2010-14, not to the likely situation in 2014 only The scores based on quantitative data are usually calculated on the basis of the numeric average for an indicator over the period In some cases, the "average" is represented, as an approximation, by the recorded value at the mid-point of the period (2007 or 2012) In only a few cases is the relevant variable appropriately measured by the value at the start of the period (eg, educational attainments) For one indicator (the natural resources endowment), the score remains constant for both the historical and forecast periods Back to Rankings Country Forecast July 2010 © The Economist Intelligence Unit Limited 2010 Dominican Republic: Indicator scores in the business rankings model Out of 12 countries: Argentina, Brazil, Chile, Colombia, Costa Rica, Cuba, Dominican Republic, Ecuador, El Salvador, Mexico, Peru and Venezuela a Note A single asterisk (*) denotes scores based on quantitative indicators Indicators with a double asterisk (**) are partly based on data All other indicators are qualitative in nature Country Forecast July 2010 © The Economist Intelligence Unit Limited 2010 Dominican Republic: Indicator scores in the business rankings model Out of 12 countries: Argentina, Brazil, Chile, Colombia, Costa Rica, Cuba, Dominican Republic, Ecuador, El Salvador, Mexico, Peru and Venezuela a Note A single asterisk (*) denotes scores based on quantitative indicators Indicators with a double asterisk (**) are partly based on data All other indicators are qualitative in nature Country Forecast July 2010 © The Economist Intelligence Unit Limited 2010 Dominican Republic: Indicator scores in the business rankings model Out of 12 countries: Argentina, Brazil, Chile, Colombia, Costa Rica, Cuba, Dominican Republic, Ecuador, El Salvador, Mexico, Peru and Venezuela a Note A single asterisk (*) denotes scores based on quantitative indicators Indicators with a double asterisk (**) are partly based on data All other indicators are qualitative in nature Country Forecast July 2010 © The Economist Intelligence Unit Limited 2010 Dominican Republic: Indicator scores in the business rankings model Out of 12 countries: Argentina, Brazil, Chile, Colombia, Costa Rica, Cuba, Dominican Republic, Ecuador, El Salvador, Mexico, Peru and Venezuela a Note A single asterisk (*) denotes scores based on quantitative indicators Indicators with a double asterisk (**) are partly based on data All other indicators are qualitative in nature Country Forecast July 2010 © The Economist Intelligence Unit Limited 2010 Dominican Republic: Indicator scores in the business rankings model Out of 12 countries: Argentina, Brazil, Chile, Colombia, Costa Rica, Cuba, Dominican Republic, Ecuador, El Salvador, Mexico, Peru and Venezuela a Note A single asterisk (*) denotes scores based on quantitative indicators Indicators with a double asterisk (**) are partly based on data All other indicators are qualitative in nature Country Forecast July 2010 © The Economist Intelligence Unit Limited 2010 Dominican Republic: Indicator scores in the business rankings model Out of 12 countries: Argentina, Brazil, Chile, Colombia, Costa Rica, Cuba, Dominican Republic, Ecuador, El Salvador, Mexico, Peru and Venezuela a Note A single asterisk (*) denotes scores based on quantitative indicators Indicators with a double asterisk (**) are partly based on data All other indicators are qualitative in nature Country Forecast July 2010 © The Economist Intelligence Unit Limited 2010 Dominican Republic: Indicator scores in the business rankings model Out of 12 countries: Argentina, Brazil, Chile, Colombia, Costa Rica, Cuba, Dominican Republic, Ecuador, El Salvador, Mexico, Peru and Venezuela a Note A single asterisk (*) denotes scores based on quantitative indicators Indicators with a double asterisk (**) are partly based on data All other indicators are qualitative in nature Country Forecast July 2010 © The Economist Intelligence Unit Limited 2010 Dominican Republic: Indicator scores in the business rankings model Out of 12 countries: Argentina, Brazil, Chile, Colombia, Costa Rica, Cuba, Dominican Republic, Ecuador, El Salvador, Mexico, Peru and Venezuela a Note A single asterisk (*) denotes scores based on quantitative indicators Indicators with a double asterisk (**) are partly based on data All other indicators are qualitative in nature Country Forecast July 2010 © The Economist Intelligence Unit Limited 2010 Dominican Republic: Indicator scores in the business rankings model Out of 12 countries: Argentina, Brazil, Chile, Colombia, Costa Rica, Cuba, Dominican Republic, Ecuador, El Salvador, Mexico, Peru and Venezuela a Note A single asterisk (*) denotes scores based on quantitative indicators Indicators with a double asterisk (**) are partly based on data All other indicators are qualitative in nature Country Forecast July 2010 © The Economist Intelligence Unit Limited 2010 Dominican Republic: Indicator scores in the business rankings model Out of 12 countries: Argentina, Brazil, Chile, Colombia, Costa Rica, Cuba, Dominican Republic, Ecuador, El Salvador, Mexico, Peru and Venezuela a Country Forecast July 2010 © The Economist Intelligence Unit Limited 2010