A slightly more optimistic year-end

DOMINICAN REPUBLIC - Report 19 Dec 2023 by Magdalena Lizardo

As 2023 winds down, there’s good news in the macroeconomic sphere: inflation reached its target level of 4% y/y in October, and the economic activity growth rate strengthened, to 3.6% y/y, after hitting rock bottom last June, with a mere 0.1% y/y growth. The number of tourists arriving by air and sea is projected to soon reach 10 million. Unfortunately, the revival in the last quarter won’t prevent 2023 from closing with annual GDP growth of just 2.3% - 2.5%, nearly half the average annual growth of 2000-2022. The November 18th floods highlighted the Dominican Republic’s great vulnerability to extreme weather events: the floods caused the death of 34 people, displaced 37,000 and left material damages of $0.46 billion.

To continue supporting economic recovery, and flood-affected sectors, the Central Bank created a new quick liquidity facility of DOP 25 billion, and further reduced the policy interest rate, to 7% annually for December 2023, 25 bps less than in November. In November, private sector credit continued to react positively to monetary stimuli, expanding at historically high rates. Both the lending and the exchange rates rose in November 2022, accompanied by the loss of $0.3 billion in the Central Bank's net international reserves.

Although monthly expansion of central government spending expanded by a strong 42.4% in November 2023, the fiscal situation seems uncompromised, as only 59% of the total authorized deficit in the last budget amendment for 2023 had been executed by that date, equivalent to 3.3% of GDP. Y/y growth (17.4%) of fiscal revenues improved in November. Fitch Ratings also upgraded the country's outlook from BB- stable to BB- positive. Country risk is approaching the global average, while moving away from the average of ALL countries.

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