The economist Henri Hebrard considered that the eventual signing of the agreement that would end the conflict between the United States, Israel and Iran has generated a positive reaction in international markets, especially in the energy sector.
“There is no doubt that so far “This is very good news,” Hebrard expressed when referring to the negotiation process that seeks to end hostilities in the region. However, he warned that it is still necessary to act with caution because “there is still no signed definitive document,” and some pending issues persist between Iran and Israel.
The economist highlighted that the markets’ reaction was immediate and pointed out that the price of US benchmark oil fell to $80 per barrel, after having reached levels close to $108 just a few weeks ago.
“In one month, oil has dropped close to $28 per barrel, which is an extremely positive sign for energy-importing economies, including the Dominican Republic,” he stated. However, he explained that the reduction in crude oil prices will not necessarily translate immediately into lower costs for Dominican consumers.
As indicated, when participating in an interview on the program En La Mañana that is broadcast on Teleimpacto, refined fuels, such as diesel and gasoline, continue to register prices significantly higher than oil due to supply and infrastructure problems derived from the conflict.
“I would not foresee major reductions in domestic fuel prices before the end of the year,” he said.
Anti-Crisis Law.
Regarding the bill submitted by the Government, Hebrard stated that they will allow us to face part of the budgetary pressures generated by fuel subsidies and the increase in transfers to the electricity sector.
He explained that the Government must soon present a reformulated budget and a new multi-year macroeconomic framework to reflect the changes that have occurred both in the international scenario and in the national fiscal perspectives.
“I am very curious to know these documents because they will allow us to better understand how the increased expenses will be compensated and what the real sources of income will be,” he indicated.
In the economist’s opinion, an important part of the additional resources could come from extraordinary mechanisms such as tax amnesties and the increase in income derived from mining activity.
Likewise, he highlighted that the recovery of international gold prices represents favorable news for the country, given the growing weight of mining within the Dominican economy.
“While oil goes down, gold is recovering value and that can generate important additional income for the Dominican State,” he explained.
Hebrard considered that the fiscal package has two fundamental objectives. The first consists of generating resources to face the budgetary pressures derived from the international crisis and subsidies. The second, he said, seeks to improve the business climate through tax simplification measures.
“There are initiatives that will make the lives of micro and small businesses easier, reduce informality and improve tax compliance,” he stated.
Among these measures, the elimination or reformulation of advances for small businesses stood out, as well as accelerated depreciation mechanisms to encourage new investments.
The economist also maintained that the project submitted by the Government should not be considered a comprehensive tax reform.
“I have always thought that any adjustment of less than one percent of the Gross Domestic Product is an important adjustment, but not a profound fiscal reform,” he said.
He recalled that the legislative text itself avoids using the terms “reform” and “tax”, defining itself rather as an initiative of “measures for economic growth and mitigation of the international crisis.”
According to their estimates, the new measures could generate between RD$40,000 million and RD$50,000 million in additional income, while the austerity programs announced by the Government would provide savings close to another RD$40,000 million.
“We are talking about a potential impact close to RD$80,000 million between increased revenues and reduced expenses,” he indicated.
For Hebrard, if peace is consolidated in the Middle East, energy prices are stabilized and the economic measures proposed by the Executive Branch are approved, the Dominican Republic could face a considerably more favorable outlook.
“It seems that the planets are aligning. If this scenario continues, the Government could go through the last two years of management without the external crises that have marked practically its entire mandate,” he concluded.
