Dominican Republic Economic Forecast

Following the second quarter’s annual GDP growth deceleration, the economy kicked off the third quarter on strong footing; activity expanded 2.9% year on year in July—the strongest increase so far this year. Additionally, underlying momentum strengthened robustly in July: Activity rebounded 1.4% month on month. Other economic developments also support the favorable growth outlook for Q3. The Central Bank (BCRD) loosened its policy stance further in August, bringing cumulative interest rate cuts to 100 basis points since May. Moreover, in July, inflation was at the midpoint of the BCRD’s target band, and core inflation eased further, alleviating the pressure on purchasing power. In addition, remittance growth accelerated to 10.0% year on year in the same month, supporting private consumption. Meanwhile, tourist arrivals rose nearly 11% annually in July, quickening slightly from Q2’s rise.

In July, inflation was steady at June’s 4.0%—the mid-point of the BCRD’s 3.0–5.0% target band—and core inflation eased to a 30-month low of 5.1% (June: 5.3%). Headline inflation will rise from current levels by year-end on stronger activity, a weaker currency year on year and a base effect. In 2023, average inflation will exceed the upper bound of the target range.