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Cuba, Dominican Republic and Puerto Rico Country Risk Report Q2 2016

  • February 2016
  • -
  • Business Monitor International
  • -
  • 55 pages

Core Views

A gradually improving tourism sector and strong private consumptiongrowth will drive robust real GDP growth rates in the DominicanRepublic in the next few years.Puerto Rico to remain in a recession through 2015 amid high unemploymentand weak investment, and should see a high likelihood ofadditional defaults following the missed debt servicing payment bythe Public Finance Corporation.Reforms in Cuba are headed in a positive direction and investorinterest is on the rise. However, the country’s transition towards amore market-orientated economy will be slow, as illustrated by theincremental steps towards abolishing the dual exchange rate regime.Major Forecast ChangesBuoyant government expenditure and solid private consumption,even despite slumping precious metals production, will support realGDP growth to a greater extent than we previously anticipated. Wenow forecast real GDP growth of 5.4% in 2016 ,slightly slower thanan estimated 6.2% in 2015.We have also downgraded our growth forecasts for Puerto Rico,due to significant fiscal tightening and reduced private investment.We forecast real GDP will contract by 0.6% in FY2015, and growby an average of just 0.7% from FY2016 to FY2019.

Table Of Contents

Cuba, Dominican Republic and Puerto Rico Country Risk Report Q2 2016
BMI Indices - Brief Methodology 5
BMI Risk Index - Cuba6
BMI Risk Index - Dominican Republic7
BMI Risk Index - Puerto Rico8
BMI Risk Index League Tables9
Regional SWOTS 10
Executive Summary - Cuba 13
Core Views13
Major Forecast Changes13
Key Risks13
Chapter 11: Economic Outlook - Cuba 15
Cuba Fiscal And Debt Outlook 15
Paris Club Deal A Major Step Towards Global Reintegration15
The deal struck with the Paris Club of nations forgiving billions of dollars of Cuba's unpaid debt will help the island gain access to
development finance and ultimately pave the way for stronger economic growth
Chapter 12: 10-Year Forecast - Cuba 17
The Cuban Economy To 2025 17
Reforms And Global Integration To Drive Stronger Growth Over The Next Decade17
Economic growth in Cuba will pick up in the coming decade, due to incremental reforms on the part of the government and greater
engagement with the global economy
TABLE: LONG-TERM MACROECONOMIC FORECASTS17
TABLE: THE CUBAN BUSINESS ENVIRONMENT TWO-STEP18
Chapter 13: Political Outlook - Cuba 21
Domestic Politics 21
Global Integration Moving Forward, But US Relations Will Remain Cool21
Foreign interest in Cuba is on the rise, evident by rising levels of tourism and strengthening ties with Europe
TABLE: POLITICAL OVERVIEW21
Long-Term Political Outlook 22
Political Change To Come, Despite Legacy Of Intransigence22
The Cuban political system is heading for substantial change and uncertainty as the Castro brothers prepare to leave office in 2018 after
more than 50 years in power
Chapter 21: Economic Outlook - Dominican Republic 27
Economic Growth Outlook 27
Structurally Slower Growth Ahead27
A deceleration in government consumption growth combined with weak export performance will drive a growth slowdown in the
Dominican Republic over the next several years
TABLE: ECONOMIC ACTIVITY27
Monetary Policy 28
Cautious Rate Cuts In 201628
The Banco Central de la República Dominicana will cut its policy rate by an additional 50bps in 2016 in response to below-target
inflation and decelerating growth, bringing its policy rate to 450% by the end of the year
TABLE: MONETARY POLICY29
Chapter 22: 10-Year Forecast - Dominican Republic 31
The Dominican Republic Economy To 2025 31
Recovery In Tourism To Drive Growth31
The Dominican Republic's economic outlook is bright over the next decade, with the country set to benefit directly and indirectly from
growth in the US
TABLE: LONG-TERM MACROECONOMIC FORECASTS31
Chapter 23: Political Outlook - Dominican Republic 33
Domestic Politics 33
Medina On Track For Re-Election33
Dominican Republic President Danilo Medina will likely secure re-election in the country's May presidential election He will maintain
a positive stance towards investment in the mining and tourism sectors during a second term, but is unlikely to tackle corruption, a
persistent issue for the country
Long-Term Political Outlook 35
Economic Improvements To Support Policy Continuity35
Government policies will remain business-friendly in the Dominican Republic in the coming years as strong economic growth ensures
the current political direction of the country remains popular
Chapter 31: Economic Outlook - Puerto Rico 37
Fiscal Policy And Public Debt Outlook 37
Debt Restructuring By The End Of 201637
The US Congress will grant Puerto Rico the ability to access bankruptcy court by the end of H116, which will prompt a significant
reduction in the commonwealth's debt load This will come at the expense of sovereignty of fiscal and other economic policies, and will
lead to additional cuts to government spending
Economic Growth Outlook 38
Set To Exit Recession In 201638
Puerto Rico will see its real GDP post positive growth in 2016 after contracting for nine of the past ten years Nonetheless, growth will
remain tepid as fiscal tightening weighs on government consumption and keeps many investors on the sidelines
Chapter 32: 10-Year Forecast - Puerto Rico 41
The Puerto Rican Economy To 2025 41
Growth Will Remain Subdued Amid Unfavourable Demographics41
Economic growth in Puerto Rico will remain subdued in the coming years, in large part due to unfavourable demographics and labour
market dynamics Weak fixed investment will further weigh on the long-term growth prospects of the economy
TABLE: LONG-TERM MACROECONOMIC FORECASTS 41
Chapter 33: Political Outlook - Puerto Rico 45
Domestic Politics 45
Uphill Battle For PPD In 2016 Election45
Puerto Rico's ruling PPD will struggle to maintain power in the November 2016 election as an economic crisis boosts support for the
opposition
Long-Term Political Outlook 47
No Change In Sight To Political Status With The US47
Puerto Rico's political status as a territory of the US is unlikely to change over the coming decade, given the unfavourable tax effects
that statehood would imply for residents
TABLE: IMPACT OF PUERTO RICO STATEHOOD ON SELECT FEDERAL PROGRAMMES 47
Chapter 4: BMI Global Macro Outlook 51
Global Macro Outlook 51
Downside Risks Gather Momentum51
TABLE: GLOBAL ASSUMPTIONS51
TABLE: DEVELOPED STATES, REAL GDP GROWTH, %52
TABLE: BMI VERSUS BLOOMBERG CONSENSUS REAL GDP GROWTH FORECASTS, % 52
TABLE: EMERGING MARKETS, REAL GDP GROWTH, %53
TABLE: CUBA, DOMINICAN REPUBLIC and PUERTO RICO - MACROECONOMIC DATA and FORECASTS 55

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