Dominican Republic: Decline in economic activity softens in December
Economic activity slid 1.0% year-on-year in December (November: -3.4% yoy). The reading marked the best result since February. Over Q4 as a whole, the economy shrank 2.9% (Q3: -7.2% yoy). While an official breakdown was not available at the time of writing, the construction, health, communication and financial services subsectors likely performed well—as suggested by data up to November. In addition, the softer fall in Q4 was likely the result of a recovery in visitor arrivals relative to Q3, and surging remittances aiding private consumption.
Meanwhile, the trend pointed down, with the annual average variation of economic activity coming in at minus 6.7% in December, down from November’s minus 6.1% reading.
The economy should bounce back strongly this year. The external sector should benefit from greater fiscal stimulus in the U.S. under Biden, which will support exports and remittances. Moreover, fiscal and monetary support at home will aid domestic demand. However, lingering Covid-19 restrictions, including curfews and capacity restrictions for public venues, will keep a lid on momentum, at least in the early part of the year.
Commenting on their outlook for the economy were analysts at the EIU:
“The Dominican Republic is set to be one of the fastest countries in the region to recover from the pandemic-induced recession, returning to pre-coronavirus real GDP levels by 2022 (as opposed to 2023 for most other major economies). However, despite its comparatively strong growth prospects, the economy will be weakened by the 2020 recession, as its productive capacity has sustained damage, which will impair its medium-term prospects. Moreover, […] inbound tourism (one of the country’s major economic sectors) will fail to return to pre-coronavirus levels owing to international travel restrictions imposed to tackle the pandemic and consumer fears about contracting the virus. This will have knock-on effects for private consumption amid slow job growth.”