Dominican Republic

Dominican Republic GDP Q1 2018

Dominican Republic: Growth remains rapid in Q1 thanks to ongoing impact of monetary stimulus

According to a preliminary estimate released by the Central Bank on 2 May, the economy expanded 6.4% in Q1 in annual terms, just below Q4’s 6.5% but significantly above the growth rates observed in the middle of last year. The economy continues to benefit from the more expansive monetary stance adopted since August 2017, when the Central Bank reduced its policy rate and trimmed reserve requirements to boost lending. The measures have borne fruit; Central Bank figures show a marked acceleration in credit growth in the first four months of this year, while average interest rates in the banking sector have fallen.

Looking at a breakdown by production, Q1’s performance was broad-based. Manufacturing in duty-free zones was the largest contributor to growth, chalking up a 10.9% expansion. Boosted by greater private-sector activity as firms took advantage of improved credit conditions, construction also played an important role, expanding 9.3% year-on-year. The trade sector expanded 8.2%, while the hotels and restaurants sector also grew at a brisk pace, driven in part by a surge in tourist arrivals in the first quarter.

Monetary easing is likely to continue stimulating the economy 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. 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.

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