Dominican Republic: Economic activity picks up in August on monetary stimulus
September 30, 2019
The economy gained momentum in August, according to the Central Bank’s monthly indicator for economic activity (IMAE, Indicador Mensual de Actividad Económica). Growth clocked 4.8% year-on-year, up from July’s 4.6% figure.
While a breakdown by sectors was not available at the time of writing, recent monetary easing likely played an important role in supporting growth. The Central Bank’s policy rate was cut by 100 basis points between June and August, while of the DOP 34 billion in extra liquidity announced by the Bank in recent months, around DOP 17 billion had been channeled to the real economy by end-August—chiefly to the manufacturing, retail and agricultural sectors.
Looking ahead, monetary stimulus measures should continue to feed through to the economy, buttressing consumption and investment in coming months. Turning to 2020, growth is likely to ebb in line with a slowing U.S. economy, although the Dominican Republic should continue to strongly outperform the regional average.
According to Carlos de Sousa, an economist at Oxford Economics: “We see upside risks on growth and inflation from expansionary policies, and a 14% minimum wage increase. A sharp deceleration of the US economy (the country’s main trading partner, and key source of tourism and remittances) constitutes the main downside risk.”
Author: Oliver Reynolds, Economist