Market Update:

Dominican Republic

 

GDP growth in the Dominican Republic showed a 4.6% increase during 2017. During the last quarter of the year the Dominican economy grew by 6.5%, mainly due to the easing of the monetary measures adopted since August 2018, as well as a more active fiscal policy during the second half of the year. These measures contributed to boost economic activity in general and domestic demand in particular, in spite of the negative effects of the hurricanes Maria and Irma that brushed the island briefly in September 2017.

Growth during 2017 was explained by increases in the following principal sectors: Hotels, Bars and Restaurants (6.7%), Financial intermediation (4.4%), Agricultural (5.8%), Manufacturing of Free Trade Zones (4.6%), Transport and Warehouse (5.0%), Construction (4.1%), Retail (3.0%) and Local Manufacturing (2.9%).

By the end of 2017, the total credit portfolio of the consolidated financial sector registered an expansion of 8.8%, or DOP84.5bn (US$1.7bn), thanks to the easing of the legal reserve, since those resources were directed towards productive sectors (such as housing). In this regard it is worth noting that loans granted to the private sector increased by 9.9%, focused on Transport and Communications (44.2%), Agricultural (18.0%), Hotels and Restaurants (15.8%) and Retail (13.9%), among others.

Final consumption increased by 4.7% and, at the same time the exports of goods and services increased 4.7% in comparison with 2016 as well – in other words, we have witnessed balanced growth in the Dominican recently. Gross Fixed Capital formation showed a more moderate growth of 0.5%, in spite of the contraction showed during 1H 2017, due to the influence of the external and internal factors that affected the expectations of the economic actors.

The annual inflation rate, measured from December 2016 to December 2017, through the variation in CPI, ended at 4.0%, so well within the range established by the Monetary Program (4.0% ± 1.0%).

The current account deficit on the Balance of Payments for 2017 showed a deficit of US$165.1m, equivalent to only 0.2% of GDP - this positive result is explained due to the considerable increase in the remittances, as well as strong tourist revenues.

Regarding the commercial account, total exports increased by 2.9% (+US$280m) in 2017, mainly due to the increase of domestic exports and of exports from the Free Trade Zones of 2.1% and 3.5% respectively. Total imports increased by 1.7%, mainly due to an increase of oil imports due to higher prices.

The implementation of the monetary policy during 2017 was characterized by a neutral position during the first half, followed by a monetary ease during the second half of the year. The Central bank’s decision to ease conditions with a combination of a 50bps reduction in the central interest rate, plus a reduction in the required legal reserves of 2.2% led to the liberalization

of over DOP20 billion (i.e. US$400m) of resources for the economy which help boost activity, especially in the last quarter as noted above.