Dominican Republic Economic Outlook
The economy gained notable steam in the third quarter: GDP growth nearly tripled to 2.6% year on year in Q3 from Q2’s 1.0% annual increase. Q3’s reading was the strongest since Q4 2022. Consequently, GDP rose 1.7% in January-September. Looking at monthly data, Q3’s upturn was largely due to activity growth in September accelerating to a nine-month high likely on strong household consumption. Interest rates were cut, inflation averaged the lowest since Q2 2020 in Q3, and annual remittances growth picked up to the strongest since Q4 2021 in the quarter. Meanwhile, tourist arrivals rose 10.2% year on year in Q3, virtually unchanged from Q2, despite the sector having seemingly completed its post-Covid-19 recovery. Further interest rate cuts in October and relatively muted price pressures should lead to stronger GDP growth in Q4.
Dominican Republic Inflation
In September, inflation inched up to 4.4% (August: 4.3%) on stronger price increases for food. In 2024, inflation will slow from 2023 and should average around the midpoint of the Central Bank’s 3.0-5.0% throughout the year due to the lagged effects of past interest rate hikes. Stronger-than-anticipated activity is an upside risk.