Dominican Republic Economic Outlook
The economy ended 2022 with a bang: Annual economic activity growth accelerated to 3.3% in December. However, the upturn was not enough to pull Q4’s average growth above that of the prior three months. Turning to this year, activity has cooled so far. Economic growth waned to 0.4% year on year in January—the weakest rate in two years—but this was due in no small part to an unfavorable base effect. Moreover, in sequential terms, activity declined at the steepest pace in 33 months in January. More positively, in January–February, price pressures continued to recede and the Central Bank kept rates unchanged. These developments, coupled with remittances increasing at the strongest annual pace in two years during January, should have aided spending. The external sector, meanwhile, fared well at the outset of the year, with tourist arrivals up year on year in January.
Dominican Republic Inflation
In February, inflation cooled to an over two-year low of 6.4% (January: 7.2%). Softer increases in food and transport prices drove the moderation. Slower economic growth, due in part to contractionary monetary policy, will continue to put downward pressure on inflation for the remainder of the year. It will remain above the Central Bank’s 3.0–5.0% target, however.