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���������ֳ�-New York-11 December 2012: ���������ֳ� has revised the Outlooks on the Dominican Republic's ratings to Stable from Positive. The agency has also affirmed the long-term foreign and local currency Issuer Default Ratings (IDRs) at 'B'. In addition, ���������ֳ� has affirmed the Dominican Republic's Country Ceiling at 'B+' and its short-term foreign currency IDR at 'B'.

RATING RATIONALE
The revision of the Outlooks to Stable from Positive reflects the deterioration in the sovereign's fiscal accounts; present external vulnerabilities; and the new government's challenges to reduce fiscal deficits and stabilize debt ratios in the context of budgetary rigidities, rising social demands and slower economic growth.

Dominican Republic ratings are underpinned by the country's high income per capita and social indicators, diversified service-based economic structure, stable macroeconomic performance, rising gold export receipts and increased fiscal financing flexibility.

Electoral spending and revenue underperformance have undermined public finances and fiscal management this year. The central government deficit is estimated to have doubled to 5.4% of GDP in 2012, which is materially worse than ���������ֳ�'s earlier expectations. This fiscal outturn will exceed the 0.9% of GDP deficit stipulated in the 2012 budget and the additional 3% of GDP deficit approved in a supplementary budget in July 2012.

The incoming President Danilo Medina has put forward an ambitious consolidation plan that includes raising taxes by 1.5% of GDP in 2013, withdrawing the infrastructure stimulus of 2% of GDP and containing current spending at the levels observed during non-electoral periods. However, burdensome electricity subsidies and public sector wages as well as legally mandated transfers to recapitalize the central bank and invest in pre-university education represent challenges for the fiscal consolidation strategy.

Fiscal deterioration and slower GDP growth has led to a further increase in government indebtedness. ���������ֳ� forecasts that the debt burden is likely to remain above 30% of GDP in the coming two years. While lower than the 'B' median, the debt to revenue ratio of over 227% is well above the 'B' median and highlights the narrowness of the country's revenue base.

The cyclical slowdown of the economy adds downside risks to fiscal performance. Growth fell from 7.8% in 2010 to 4.5% in 2011 and eased further to 3.9% in Q312. Policy unpredictability and the tax reform continue to affect business confidence and domestic consumption. ���������ֳ� forecasts real GDP growth at 3.1% in 2013 and a rebound to 4.5% in 2014, well below the country's five-year average of 5%.

Dominican Republic's capacity to weather external shocks is limited. International reserves declined to USD3.5 billion in November 2012, covering two months of current external payments. External financing needs at 117% of reserves remain among the highest in the 'B' category. The new administration will have to preserve investor confidence and restore its fiscal policy credentials to maintain multilateral support and access international capital markets at favorable interest rates.

However, the long-awaited start of gold exports by Barrick is strengthening the capacity of the economy to generate larger and more resilient export receipts. ���������ֳ� expects the current account deficit to halve to 3.4% of GDP by 2014, half the forecast 'B' median of 7%.

The transition towards an inflation targeting regime and a stable currency have enhanced monetary policy credibility and helped anchor inflation expectations. Average inflation fell from 8.5% in 2011 to an expected 4% in 2012, below the official target of 5.5% plus/minus 1%.

Market access and the development of the local bond market have increased fiscal financing flexibility. Dominican Republic placed USD1.5 billion in 10-year global bonds between April 2010 and November 2011. On the domestic front, auctioned and private placements of treasury bonds recorded USD1.2bn in 2012, covering 20% of the government's borrowing program.

RATING OUTLOOK STABLE
The main factors that could lead to a positive rating action are:

--Improved fiscal management under the new administration that bolsters confidence in the fiscal consolidation strategy;
--Reduction in external vulnerabilities, which enhances the country's shock-absorption capacity.

The main factors that could lead to a negative rating action are:

--Continued fiscal deterioration and growth underperformance leading to negative debt dynamics and macroeconomic instability;
--Financing constraints in the context of fiscal and external pressures.

KEY ASSUMPTIONS AND SENSITIVITIES
The ratings and Outlooks are sensitive to a number of assumptions:

--���������ֳ�'s economic growth forecasts factor in a mild recovery in the U.S. through 2014 and assume that the U.S. fiscal cliff would be avoided. Given the Dominican Republic's significant ties to the U.S. through trade, tourism and remittances, a sharp deterioration in U.S. prospects would materially weaken the island's economic growth performance.

--The reduction in the current account deficit assumes that Barrick sustains annual gold production at one million ounces and international prices fare around USD1,700 per ounce. It also assumes average oil import prices of USD100 per barrel over the next two years. A severe oil price shock could have adverse impact on external and fiscal accounts.

--���������ֳ� assumes that there is no materialisation of severe tail risks to global financial stability that could trigger a sudden stop in capital inflows and hinder external market financing for the Dominican Republic.

Contact:

Primary Analyst
Cesar Arias
Associate Director
+1-212-908-0358
���������ֳ�, Inc.
One State Street Plaza
New York, NY 10004

Secondary Analyst
Erich Arispe
Director
+1-212-908-9165

Committee Chairperson
Shelly Shetty
Senior Director
+1-212-908-0324

Media Relations: Elizabeth Fogerty, New York, Tel: +1 (212) 908 0526, Email: elizabeth.fogerty@fitchratings.com.

Additional information is available at ''. The ratings above were solicited by, or on behalf of, the issuer, and therefore, ���������ֳ� has been compensated for the provision of the ratings.

Applicable Criteria and Related Research:
--Sovereign Rating Methodology
--Global Economic Outlook

Applicable Criteria and Related Research: