Dominican Republic: Economic activity slows sharply in Q2
July 31, 2019
The economy lost steam in Q2, according to the Central Bank’s monthly indicator for economic activity (IMAE, Indicador Mensual de Actividad Económica). Growth averaged 3.7% in the period, down from Q1’s 5.7% growth, with June’s reading—a paltry 2.6% expansion—the weakest since September 2017.
While a breakdown by sectors was not available at the time of writing, domestic uncertainty tied to the pre-election process, coupled with international trade uncertainty, likely dampened investment. Moreover, remittances were flat year-on-year in Q2, which could have taken the edge of private consumption growth. In addition, a tough base effect due to a surge in Q1 last year also played a role.
In H2, the economy should be supported by lower interest rates and the Central Bank’s credit injection. However, growth over 2019 as a whole should still slow notably from last year, in line with slower growth in the U.S., the country’s key trading partner. Trouble in the tourism sector, where recent bad press is likely to harm visitor arrivals in the second half, poses a downside risk to the outlook.
Author: Oliver Reynolds, Economist