Dominican Republic: Economic activity surges in April, confirming strong start to the year
May 28, 2018
The Dominican Republic’s economy started the second quarter as it ended the first; at a blistering pace. Economic activity surged by 7.5% in annual terms in April, according to the Central Bank’s monthly indicator for economic activity (IMAE, Indicador Mensual de Actividad Económica). This marks the strongest reading since June 2016 and is a sign that the economy continues to benefit from monetary easing since the second half of last year.
The construction sector continued to be the main growth driver, chalking up an impressive 33.7% expansion. The recent strong performance of construction is in large part due to a series of projects underway in the residential, tourism and energy sub-sectors. The financial and trade sectors also grew at a rapid pace (10.1% and 9.1% respectively in annual terms). The financial sector is being buoyed by stronger credit growth, while the trade sector is benefitting from strong consumer spending amid healthy remittances growth.
The economy should continue benefiting from the looser monetary stance in the quarters ahead, while GDP growth figures in Q2 and Q3 should benefit from a favorable base effect, following soft readings in the corresponding period last year. The economy should also benefit from higher real wages and employment—which should buoy private consumption—while the construction sector should support growth. However, the external sector will likely contribute less to the economy—despite solid export growth—as higher international oil prices and stronger domestic demand boost imports.
Author: Oliver Reynolds, Economist