Dominican Republic

Dominican Republic Economic Activity December 2021

Dominican Republic: Economic activity loses steam in December signaling a slowdown in Q4

Economic activity expanded 10.6% year-on-year in December (November: +13.1% yoy). December’s result puts output growth at 11.1% for Q4, coming in slightly below the 11.4% logged in Q3. In 2021 as a whole, the economy grew 12.3%, rebounding from the 6.7% fall registered in 2020, and surpassing pre-pandemic levels.

Looking at a sectoral breakdown, the slowdown came amid a decline in mining and quarrying output. In addition, manufacturing in free zones and services activity both grew at a softer pace. Contrastingly, local manufacturing, agriculture and construction gained steam in the quarter.

Meanwhile, the trend improved, with the annual average growth of economic activity coming in at 12.3% in December, up from November’s 11.2% reading.

On the outlook for 2022, analysts at EIU noted:

“In the near term, growth will be driven mainly by the reopening of the economy as the Covid-19 vaccine rollout nears completion. In turn, this will bolster consumer spending and support robust growth in infrastructure investment. Tourism exports will also rise as economic recovery brings a normalization in tourist arrivals. Growth in inflows of workers’ remittances will remain strong in the medium term, which will support private consumption.”

However, they still see some obstacles to growth emerging this year:

“Cyclical headwinds to growth will come mainly from the government’s tightening of fiscal policy in 2022 as the need to preserve macroeconomic stability precipitates the unwinding of post-pandemic stimulus measures. Faced with increasingly limited fiscal space, the authorities are turning to fiscal caution in order to ring-fence sufficient spending for social programmes and public capital projects in a sustainable way. The government is likely to raise taxes in the medium term and cut public subsidies, which will dampen aggregate demand.”

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