Dominican Republic: Economic activity growth moderates in June due to a base effect, but underlying momentum is healthy
Economic activity grew 12.7% compared to the same month a year earlier in June, which was a deterioration from May’s 21.2% increase. Comparing to the same period in 2019 in order to strip out the extreme base effect, economic activity growth was stable at 4.7% in June.
Over Q2 as a whole, the economy expanded 25.4%, aided by surging activity in sectors such as construction, manufacturing and mining. Moreover, the hotels and restaurants sector soared as the tourism industry reactivated, although visitor arrivals remained well below pre-pandemic levels. Only the health and public administration sectors contracted, likely due to the lessened impact of the pandemic.
Meanwhile, annual average economic activity growth rose to 3.6% in June (May: +2.0%), which marked an over one-year high.
Looking forward, year-on-year GDP growth will continue to ebb on a less favorable base effect. However, underlying momentum should strengthen in H2 as the vaccination rollout continues at home and abroad, tourist arrivals recover and as U.S. stimulus measures bolster remittances and demand for the Dominican Republic’s exports. However, the emergence of the Delta variant poses a risk to the outlook.
Analysts at the EIU are bullish about prospects:
“The Dominican Republic is set to be one of the fastest countries in the region to recover from the coronavirus-induced recession, returning to pre-pandemic real GDP levels this year (compared with 2022 for most other economies). […] The recovery will be propelled by strong workers’ remittance inflows from the U.S. […] Investment will also be a driver of growth this year. The accommodative monetary and financial policies put in place by the Central Bank amid the crisis have allowed companies to resume their capital expenditure projects and launch new ones.”