The president, Leonel Fernandez of the ruling Partido de la Liberacion Dominicana (PLD), took office for a second consecutive four-year term in August 2008. A decelerating economy, a failing energy sector and a lack of social development will increasingly expose the shortcomings of Mr Fernandez's administration, and the ruling PLD's majority in Congress will come under threat at the 2010 mid-term elections. A PLD loss, which is not yet the Economist Intelligence Unit's main assumption, would complicate governability. The next presidential election is set for 2012.Institutional shortcomings and a lack of accountability represent threats to the maintenance of momentum on reforms needed to put the public finances on a healthier footing, and to keep inflation in check. After falling into deficit in 2008 owing to a heavy increase in spending on election activities and fuel subsidies, the fiscal deficit will remain high as revenue declines in 2009. A monitoring agreement with the IMF should help the government gradually improve its fiscal situation in 2010-13. However, as the economy slows, chronic institutional weaknesses and energy problems make some slippage from fiscal targets likely. This will restrict a return to fiscal surplus during the forecast period, resulting in a higher public debt ratio, which will remain vulnerable to the risk of currency volatility.Having rebounded strongly in 2005-07 average real GDP growth slowed sharply in the second half of 2008. This weakening will continue in 2009 and real GDP will contract owing to weaker global demand and structural constraints on competitiveness in the Dominican Republic. Economic growth in 2010-13 will remain significantly below 2004-07 rates. Tighter international financing conditions will maintain upward pressure on interest rates. Inflation will average 5.5% in the forecast period. The current-account deficit will remain wide and currency volatility could be a problem as reserves coverage, external debt/export ratios and global liquidity will all be weaker in 2009-13 than in 2004-08.The reform process and foreign investment will lag amid more difficult economic conditions in the forecast period. Many domestic producers will struggle with Asian competition. Efforts to restructure the electricity industry will be complicated by a lack of funding and power supply problems will remain a drag on business.A sharper and more prolonged US recession than forecast, a renewed shock in the local banking sector (where oversight remains weak) or a sustained rise in global risk aversion represent the main risks to our forecasts.Key indicators200820092010201120122013Real GDP growth (%)4.5-1.02.34.04.34.6Consumer price inflation (av; %)10.61.48.56.25.85.5Budget balance (% of GDP)-3.1-3.7-3.0-1.8-1.5-1.0Current-account balance (% of GDP)-9.7-4.5-6.2-5.7-5.0-4.3Exchange rate Ps:US$ (av)34.6238.4241.6942.6744.0444.08Exchange rate Ps:€(av)50.9051.6757.7460.3863.7564.80