Dominican Republic: bailing out.(Indicators)(Brief Article)

The Dominican Republic's economy shrank 1.3% in 2003, the sharpest drop in a decade, according to the United Nations. The slowdown came hand-in-hand with high inflation.

Under the outgoing president, Hipolito Mejia, the economy suffered. Foreign debt doubled to US$5.5 billion, the currency devalued and inflation hit 40% in 2003 alone.

U.S. ratings agency Fitch Ratings cut the country's debt rating, citing the government's inability to pay a $27 million payment due in January. The country faces a severe fiscal crisis, Fitch reports.

According to Standard & Poor's, the republic's economy will shrink between 1% and 2% in 2004. "Growth depends on the new government's ability to present and execute and audacious fiscal reforms," says Standard & Poor's analyst Richard Francis.

President-elect Leonel Fernandez takes office Aug. 16, beginning his second term in office. He was president from 1996 to 2000. It appears the country has a chance to right its ship, according to analysts, if investors buy back in. "In his first term, President Fernandez generated trust in the international markets," says Fitch analyst Theresa Paiz Fredel.

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