Elevated Spending To Widen 2022 Fiscal Deficit In DomRep

• Moderating revenue growth and a jump in expenditures will widen the Dominican Republic’s fiscal deficit to 3.1% of GDP in 2022, from 3.0% in 2021, as the government raises social assistance and subsidy spending in response to elevated inflation. 
• Revenue growth will moderate to 10.8% in 2022, from 33.0% in 2021, as base effects fade and economic growth return closer to pre-pandemic levels. In Q1 2022, revenue growth reached 21.9% y-o-y as tourist arrivals by air grew 239.2% y-o-y (91.4% of Q1 2019 arrivals), highlighting the robust recovery in the tourism industry. However, tourism growth will moderate in the quarters ahead as economic headwinds in tourist source markets like the US and Canada increase, reducing tourism demand. 
• Persistently high food and fuel prices will lead the government to maintain generous social and subsidy spending initiatives in the months ahead, outweighing the impact of solid revenue growth and widening the deficit. 
• Total expenditures are expected to grow 11.8% in 2022, from 0.3% in 2021, as the government boosts social spending to mitigate the effects of elevated inflation on households and allocates more funding to capital expenditures.

(Source: Fitch Solutions)