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Moody’s Upgrades Dominican Republic’s Credit Ratings to Ba3

On July 20th, 2017, the agency Moody's Investors Service upgraded the long-term issuer and debt ratings of the Dominican Republic to Ba3, from its B1 level since 2010.

In a press release, Moody's argued that the rating improvement reflects the country’s continued high economic growth, reduced fiscal deficits over the past four years and reduced external vulnerabilities.

The rating agency highlighted the DR’s strong economic growth, with a per capita gross domestic product above its peers in the "B" category, as well as the prospects of maintaining high economic growth supported by strong domestic demand and external revenues from tourism and remittances.

Moody's noted that in 2016 for the first time in ten years the Non-Financial Public Sector recorded a primary surplus, reporting a surplus of 0.1% of GDP. The rating agency estimates the fiscal deficits will remain stable over the next two to three years, supported by a smaller subsidy to the electricity sector and cuts in capital expenditures, due to the completion of several infrastructure projects under construction.

According to the firm, Government’s debt to GDP ratio in the Dominican Republic have been lower than the B-median for the past decade and lower than the Ba3-median since 2014. High real GDP growth, combined with a moderate fiscal deficit, will limit the increase in public debt as a percentage of GDP in the coming years, Moody's said.

According to the press release, external imbalances have been progressively reduced in recent years, mainly due to the fall in oil prices. The entrance into operation of the new coal plants in 2018 would further moderate the impact of increases in the price of oil by replacing with imports of coal-based diesel, the agency said.

This improvement in country risk rating indicates a decreased in risk perception of the Dominican Republic, which could help to reduce the country’s financing cost in the capital markets.

For more information see the full report: https://www.moodys.com/research/Moodys-changes-outlook-on-Dominican-Republic-sovereign-rating-to-positive--PR_351266