Dominican Republic: The economy continues to roar in Q3
October 23, 2018
According to a preliminary estimate released by the Central Bank on 23 October, the economy expanded 7.3% in annual terms in the third quarter. This was up from Q2’s 7.1% increase and likely marked the fastest pace of growth in the whole of Central America and the Caribbean.
The third quarter’s performance was broad-based. Manufacturing in duty-free zones was a key contributor to growth, chalking up a 15.3% expansion and likely aided by stronger exports to the U.S. The construction sector was another important driver, recording 8.4% growth, likely underpinned by projects in the tourism, energy and commercial sectors. The services sector also had a strong showing (+6.2% yoy), spearheaded by retail on the back of buoyant credit growth and faster employment growth. Economic activity in September was also flattered by a low base effect, due to the disruption caused in the same month last year by Hurricanes Irma and Maria.
Looking ahead, growth is expected to moderate somewhat towards potential, but will remain strong compared to regional peers thanks to favorable credit conditions, employment growth and elevated fixed investment. However, the external sector’s contribution to the economy will likely diminish—despite solid export growth—as higher international oil prices and stronger domestic demand boost imports.
Author: Oliver Reynolds, Economist