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BEST’S COUNTRY RISK REPORT Dominican Republic CRT-4
Economic Risk
August 22, 2017 Region: Caribbean Country Risk Criteria Procedures Guide to Best’s Country Risk Tiers
Country Risk Tier 2 (CRT-2) Low Level of Country Risk Country Risk Tier 3 (CRT-3) Moderate Level of Country Risk
• The Dominican Republic, a CRT-4 country, has a moderate level of economic risk, high political risk, and very high levels of financial system risk. • Over the past few years, the economy has expanded rapidly, with growth rates averaging 7.2% from 2014 to 2016. Real gross domestic product (GDP) growth is projected to slow to under 5% in the coming years, owing to uncertainty over U.S. immigration policy, Venezuelan unrest, and increasingly severe natural disasters. • The map depicts the countries evaluates in the Caribbean A.M. Best.
Vital Statistics 2016 Nominal GDP Population GDP Per Capita Real GDP Growth Inflation Rate
USD bn mil USD % % United Nations Estimates
72.19 10.1 7,159 6.6 1.6
Literacy Rate Urbanization Dependency Ratio Life Expectancy Median Age
% % % Years Years Insurance Statistics
97.3 79.0 57.8 73.7 26.1
Country Risk Tier 4 (CRT-4) High Level of Country Risk Country Risk Tier 5 (CRT-5) Very High Level of Country Risk
Regional Summary: Caribbean • The countries of the Caribbean vary by cultural origin, economic foundations, and population affluence. However, in all cases, their long-term growth and stability are highly dependent on their larger regional neighbors. • Prospects for the region are improving, but public debt levels remain a major vulnerability. However, debt in some tourism-dependent economies is decreasing from very high levels owing to fiscal consolidation efforts. • Tourism is likely to improve in 2017, supported by higher economic growth in the US, the main market for most destinations in the region. Commodity exporter Trinidad and Tobago should expect an improvement in growth as a result of stabilized commodity prices. • Countries need to strengthen their regional economic integration to become more globally competitive. They need to increase investment and savings, and build resilience to external shocks, which include social, economic, and climate related events.
Bahamas
Superintendency of Insurance
Premiums Written (Life) USD mil Premiums Written (Non-Life) USD mil Premiums Growth (2015 - 2016) % Regional Comparison Dominican Republic Jamaica Mexico Panama Trinidad and Tobago United States
Country Risk Tier CRT-4 CRT-5 CRT-3 CRT-4 CRT-4 CRT-1
161 718 12.0
Dominican Republic
Cuba
Cayman Islands
Haiti
Jamaica
Nicaragua
British Virgin Islands Puerto Anguilla Rico St. Maarten
St Kitts & Nevis
Honduras
Antigua & Barbuda Dominica
St Vincent & the Grenadines St Lucia Barbados Curacao Grenada
Costa Rica Panama
Trinidad & Tobago
Venezuela
Guyana
Colombia
Source: IMF, UN (2015 figures), Swiss Re, Axco and A.M. Best
Ecuador
www.ambest.com
Financial System Risk
Country Risk Tier 1 (CRT-1) Very Low Level of Country Risk
• The Country Risk Tier (CRT) reflects A.M. Best’s assessment of three categories of risk: Economic, Political and Financial System Risk.
Insurance Regulator
Political Risk
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Suriname
BEST’S COUNTRY RISK REPORT
Dominican Republic
Economic Risk: Moderate
Economic Growth (%) 12 Real GDP
• Tourism continues to dominate the country’s economy. Growth in the U.S. should support tourism revenues. However, natural disasters threaten this industry and the country’s infrastructure system.
CPI Inflation
10
8
• The country’s fiscal budget remains vulnerable as the public debt to GDP ratio remains high at 44%. Fiscal reforms were planned for 2015 but are not expected to materialize until 2017.
6
4
• Currently, roughly 10% of the Dominican Republic’s population are emigrants. Should changes in U.S. immigration policy result in a spike in deportations, the country’s GDP could decrease due to a decline in remittances.
2
0
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022
Source: IMF World Economic Outlook and A.M. Best
• Output growth levels are expected to decline slightly in 2017 and 2018 but remain the highest in the region.
Political Risk: High
Political Risk Summary
• In the 2016 presidential election, President Danilo Medina of the Dominican Liberation Policy won a second term. The country’s democracy is stable but has weak points, mainly in its lack of checks and balances, separation of powers, and accountability.
Score 1 (best) to 5 (worst) International Transactions Policy
World Average Dominican Republic
5 4
Legal System
Monetary Policy
• In Transparency International’s Corruption Perceptions Index, the Dominican Republic ranked of 120 out of 176 countries for high government corruption.
3 2 1
Regional Stability
Fiscal Policy
• Government electricity subsidies, which are approximately 2% of GDP, continue to promote an inefficient, ineffective, and costly system. The government has failed to make any significant progress towards reforming the system.
0
Social Stability
Business Environment
Government Stability
• Public unrest stems from persistent economic inequality, frequent and extensive power outages, elevated crime rates, and poor funding for health and education services.
Labor Flexibility
Financial System Risk: Very High
Source: A.M. Best
GDP Per Capita and Population GDP Per Capita
70,000
Population
• The Dominican insurance industry is regulated by the Superintendency of Insurance.
300
50,000
250
40,000
200
USD
Millions
60,000
30,000
150
20,000
100
10,000
50
0
• The current account balance is expected to remain negative in 2017 but expected to improve, reaching -2.1% of GDP due to higher tourism revenues and remittances.
350
Dominican Republic
Jamaica
Mexico
Panama
Trinidad United States and Tobago
• Liquidity remains strong, as the country has sufficient reserves to cover any short-term external debt. Furthermore, the country’s debt load is moderate compared to the region, standing at 32.9% of GDP. • The central bank has a targeted an inflation rate of 4%, plus or minus 1%. As of April 2017, year-to-date inflation was 1.11% and is expected to remain within the central bank’s target range.
0
Source: IMF and A.M. Best
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