Dominican Republic GDP Q4 2017

Dominican Republic

Dominican Republic: Ample fiscal and monetary stimulus shores up GDP growth in Q4

March 29, 2018

A more comprehensive release of GDP data confirmed the economy’s solid performance in the last quarter of 2017, which benefited from increased government and Central Bank support, as well as a recovery in tourism inflows following hurricane-induced disruptions in September. Annual GDP growth was confirmed at 6.5%, a marked acceleration from the 3.1% expansions recorded in the two previous quarters and the highest increase since Q2 2016. That said, two weak quarters of growth meant GDP for the whole year decelerated to 4.6% from 6.6% in 2016.

Looking at a breakdown by expenditure, the fourth quarter saw improvements across the board over the previous quarter. Annual household spending growth accelerated to 4.6% in Q4 from 3.6% in Q3, with consumers benefiting from solid employment growth and healthy remittance inflows. Government spending growth also picked up, hitting a near two-year high of 10.4% in Q4 from 7.1% in Q3, reflecting the government’s loosened fiscal stance. In light of ongoing reconstruction efforts and increased public infrastructure support, fixed investment growth also accelerated, to 11.9% from 2.7% in Q3, marking the highest figure in a year and a half.

The external sector also performed well in the fourth quarter, with export growth rebounding from a third-quarter trough caused by Hurricanes Irma and Maria. Overseas shipments were up 6.4% in year-on-year terms, contrasting the 2.0% drop recorded in the previous quarter. Conversely, imports contracted for a third consecutive quarter in the fourth quarter, shrinking 1.5% (Q3: -6.4% year-on-year). All in all, a decrease in imports and a rebound in exports saw the external sector’s net contribution to overall growth improve from 1.5 percentage points in the third quarter to a 2.0 percentage-point contribution in the fourth quarter.

On an activity-based breakdown, GDP growth was propelled by much faster growth in the secondary and tertiary sectors. Growth in industrial activities was boosted by higher manufacturing output and a surge in construction-related activities, which expanded 18.5% in annual terms in the fourth quarter on the back of increased government support. The expansion was the strongest since Q2 2016 and followed a more moderate 6.1% increase in the third quarter. In the tertiary sector, tourism-related activities accounted for most of the quarter’s improvement, with activity in trade, hotels and transports all accelerating over the previous quarter.

GDP growth is expected to remain resilient this year on solid private consumption and fixed investment growth. These should, however, also fuel a pick-up in import growth, causing the external sector to subtract from growth this year. FocusEconomics Consensus Forecast participants see the economy growing 4.5% in 2018, which is unchanged from last month’s forecast. For 2019, panelists expect the economy to expand 4.4%.

Author:, Economist

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Dominican Republic GDP Chart

Dominican Republic GDP Q4  2017 0

Note: Year-on-year changes of GDP in %.
Source: Dominican Republic Central Bank and FocusEconomics Consensus Forecast.

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