The Central Bank has released a report with a glowing picture of the Dominican economy for 2018. Central Bank Governor Hector Valdez Albizu noted that the results of the latest figures show that the DR is the leading economy in Latin America as far as growth is concerned.
The Central Bank says the economy should close at around 7% GDP growth. The aforementioned value, estimated by the Economic Commission for Latin America and the Caribbean (ECLAC), is higher than the original estimated goal of five percent growth.
Dynamic sectors of the economy leading the growth are communications (11%), construction (10.6%), export free zones (9.1%), health (8.8%), commerce 8.5%, financial services (7.9%), sector that is most driving the expansion of the economy with 12% followed by construction with (10.6%), commerce (8.9%) and farming (6.5%), warehousing and transport (6.5%), domestic manufacturing (6%), energy and water (5.7%), hotels & restaurants (5.6%), among others.
Peso depreciation was kept under control with the exchange rate of 50.12 pesos for one dollar comparative to the estimated 50.17 to the dollar. Inflation is expected to end the year at 1.3%.
The Central Bank reports that Gross International Reserves (hard currencies), as of 26 December 2018 were US$7.2 billion, which equals about four months worth of imports.
Central Bank governor Valdez Albizu presented the report at an assembly of the top ranking officers of the bank. He detailed that according to preliminary numbers from the Monthly Economic Activity Index, the growth is the result of the 6.9% performance from January through September and a 7.1% performance in the last quarter of the year. The report noted that communications, construction and the free zones were all double-digit contributors to the growth, but health, commerce and financial services were all above the 7% level.
Another look at the economic performance by Pavel Isa Contreras is a bit more somber, but still highlights the solid GDP performance of the economy. Isa Contreras said growth had been forecasted to be between an optimistic 5.5% and a less positive 5.0% for the year, back in January. Isa Contreras says that a GDP growth of 6.5% is most likely. He sees just an 11.1% jobless rate among the economically active population. This is a continuation of a downward trend that began in 2014.
Regarding inflation and the exchange rate, Isa Contreras says that with the available data, he feels that inflation will not top 2% for the year.
Isa Contreras says that his analysis shows that there are three areas that contributed to the stable economy outcome: the tumble in oil prices since October; the containment by the Central Bank of the exchange rates that in turn allowed for the slow inflation and lesser devaluation of the Dominican peso and the Central Bank’s restrictive monetary policy. This is something Isa Contreras attributes to the tight reins the bank has on liquidity, as seen in the M1 (money in circulation) that in October was some RD$15 billion less than in June.
However, as an astute observer, the economist notes that a lot of all of this is due to maneuvers by the Central Bank involving more debt. The total debt of the Central Bank was pegged at RD$559 billion, more than RD$78.6 billion more than in 2017 and RD$85.7 billion more than in September of this year. As a result, interest rates are up.
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Bancentral
2 January 2019
