Economic recovery underway, amid higher inflation
For the first time since the start of the pandemic, the Dominican Republic in February showed positive y/y growth, of 1.1%, which offset the -1.8% contraction seen in January. Accumulated growth in January-February 2021, compared to the same period in 2020, was -0.3%. The expansion, mainly in construction, commerce, local manufacturing and agriculture, has compensated for the drastic 50.1% y/y plunge in tourism activity during January-February 2021.
The country’s COVID-19 vaccination program has been successful, with vaccination of the population over age 68 complete – though there remain inconveniences over guaranteeing access to the vaccines. And the program continues to be at risk of lacking an adequate flow of vaccine supplies.
Growth prospects for 2021 are promising, and our projections coincide with those released by the government and international organizations. Our projections indicate that 2021 economic growth will be between 4.4% and 6.4%, with achievement of around 5.4% highly probable. Uncertainty remains, given that a third wave of COVID-19 has not been ruled out, either locally or internationally – and a need to reintroduce more drastic confinement measures would roll back recovery.
So far recovery has been accompanied by a persistent rise in prices starting in June 2020, but price rises have increased in the last two months, compared to the end of 2020. The good news is that the projection models show a convergence of inflation toward lower levels, starting in H2 2021. The upside risks are associated with the evolution of inflationary pressures worldwide, and higher oil prices under a scenario of strong global growth.
In politics, Q1 2021 was characterized by internal reorganization activities of most parties. The PLD concluded its leadership renewal congress, in which it ratified ex-president Danilo Medina as the party’s president. On the social level, the situation has been tenser, since Congress is debating whether to include in the new Penal Code the decriminalization of abortion in cases when the mother’s life is in danger; in cases of rape; and when the fetus is not viable. Beyond the social relevance of Congress’ final decision, politically this issue places President Luis Abinader before the dilemma of vetoing the modification of the Penal Code, if approved, opening the possibility of his entering into conflict with religious groups, or with Liberal sectors that supported him during the presidential campaign.
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