* Government forecasts economy to grow 5.5 pct in 2012
* 2012 inflation expected to be 5.5 percent
* IMF lowers 2011 growth forecast slightly
(Updates with quotes, adds byline)
By Manuel Jimenez
SANTO DOMINGO, Sept 15 (Reuters) - The Dominican Republic’s economy is expected to grow by 5.1 percent this year and is forecast to expand 5.5 percent in 2012, the country’s economy minister told Reuters on Thursday.
The growth outlook for next year will be included in the 2012 budget the government plans to submit to Congress in the coming days, Economy Minister Temistocles Montas said.
Montas said the government is also forecasting inflation next year of 5.5 percent.
The Caribbean country, one of the largest economies in the region, is on pace to record its third straight year of growth in 2011.
The International Monetary Fund said on Thursday it was lowering its 2011 growth projection to between 4 percent and 5 percent from a previous forecast of between 5 percent and 5.5 percent.
“Despite an unexpected deterioration in the external environment, overall macroeconomic conditions remain favorable,” it said in a statement after an IMF mission visit as part an ongoing economic aid program.
“While there has been a deceleration in activity, the economy is growing at the healthy rate of about 4 percent,” the statement said.
The IMF said headline inflation had reached 10 percent in August year-on-year, but was expected to fall to between 7 percent and 8 percent by the end of 2011. The Washington-based lender forecast 2012 inflation of between 5 percent and 6 percent.
The Dominican Republic’s economic outlook led Standard & Poor’s to raise the country’s credit rating in June to B-plus from B, citing prospects the economy will continue to expand. [ID:nN13221092]
The rating is four notches below investment grade.
S&P said at the time the economy will be helped by the reopening of a key nickel mine this year and the 2012 production start at Barrick Gold’s (ABX.TO) Pueblo Viejo gold project, the Dominican Republic’s largest foreign investment.
A recent research note from Barclays Capital also said it sees the country poised for steady growth, adding the Dominican Republic remained one of its top sovereign picks among Central American and Caribbean countries.
The IMF approved a $1.66 billion economic aid program for the country in 2009 when it was hard hit by the global financial crisis.
The IMF said “program performance remains broadly satisfactory” but added authorities had recently missed two targets laid out in the program including reducing government subsidies to the electricity sector and the consolidated fiscal deficit. (Writing by Kevin Gray; Editing by Kenneth Barry and Andrew Hay)