Dominican Republic: Economic activity records slowest expansion since February 2021 in January
Economic activity expanded 6.3% in year-on-year terms in January, which was a deterioration from December’s 10.6% increase. The figure marked the worst reading since February 2021.
Meanwhile, the trend improved, with the annual average growth of economic activity coming in at 13.0% in January, up from December’s 12.3%.
The slowdown in growth in January from Q4’s double-digit growth figure was due to a broad-based easing of activity in various sectors of the economy. Weaker activity was likely due to the Omicron-induced spike in Covid-19 cases that took place in the month, with firms hit by worker absenteeism caused by the virus. Growth in local manufacturing, construction, and the services sector fell, with the slowdown in growth from Q4 in the hotels, bars and restaurants sector particularly marked.
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.”