The Central Bank of the Dominican Republic (BCRD) on 14 January 2025 released an overview on the economy in 2024. The Central Bank highlighted the capping of inflation within its target range throughout 2024, the economic growth near its potential of 5% and the robust financial system. The briefing analyzes recent monetary and financial policy measures and their impact on increased liquidity, lower interest rates, and the performance of the financial system.
The BCRD measures in 2024 were successful to maintain sound macroeconomic performance and relative exchange rate stability, despite the narrowing interest rate differential with the United States and heightened volatility in international financial markets. In fact, the Dominican peso depreciated by only 5% in 2024, less than major economies in the region like Brazil, Chile, Colombia, Mexico, Paraguay, and Uruguay.
Starting in August 2024, with low inflationary pressures, moderated private credit growth, and declining interest rates in advanced economies, the BCRD resumed its rate-cutting cycle. The Central Bank reduced its policy rate by 25 basis points at each of its last five meetings in 2024, accumulating a total reduction of 275 basis points since May 2023. This move aimed to create favorable conditions for sustained economic activity.
In addition to multiple rate cuts, the BCRD implemented measures to boost liquidity, accelerating the transmission mechanism of monetary policy and supporting domestic demand. These included extending repo facilities to 28 days, eliminating provisions for interbank transactions using BCRD or Treasury securities as collateral, and redeeming BCRD securities worth RD$140 billion during the last quarter of 2024.
As a result of these measures, the BCRD’s balance sheet contracted by nearly RD$80 billion compared to 2023, equivalent to a reduction of over 2 percentage points of GDP, bringing the central bank’s debt to levels comparable to a decade ago.
Furthermore, the Monetary Board approved the release of RD$35.35 billion in required reserves for loans to low-cost housing, construction, and micro, small, and medium-sized enterprises (MSMEs). These measures, along with the redemption of securities, injected RD$175 billion in liquidity into the financial system.
The Central Bank points out that the implementation of timely monetary measures and the maintenance of macroeconomic stability contributed to the sound performance of the Dominican financial system in 2024. Financial system assets grew by 10.3%, driven by increased lending and investments. Public deposits also increased by 11.3%, reflecting strong public confidence in the financial system.
The outlook for 2025 is good. BCRD expects the financial system to continue performing well in the coming months, with higher liquidity levels contributing to a more accelerated decline in bank interest rates. The central bank forecasts that both general and core inflation will remain within the target range of 4% ± 1% in 2025.
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Central Bank
16 January 2025