Growth is hectic
Economic expansion continues to be powerful. GDP growth January-July was up 6.7% from the same period last year, with all activities registering relatively high growth rates.
Monetary policy also continues stable. The restricted monetary base December-August was down 5.41%; the broad monetary base was down 16.6%; and money in circulation was down 0.43%. Central Bank titles in circulation were up 14.8%. Though the Monetary Board kept interest rates unchanged at 5.5% in its recent meeting, this will surely change in coming months, in response to the recent Fed hikes.
Despite strong pressure from oil prices, the exchange rate is stable. Cumulative devaluation since January is 3%, and average monthly devaluation 0.38%, due to steady Central Bank interventions, supported by relatively high international reserves. Reserves were $7.43 billion as of August 31st, equal to 4.5 months of imports. Reserves have been fed by resources from global bond placements; the last placement was in July, for $1.3 billion.
For the first time since 2015, in H1 the current account closed with a deficit, of $141.3 million -- mainly due to an intense increase in imports, as the oil bill surged. Strong growth also pushed up imports of inputs and consumer goods, more than offsetting the rise in exports (up 8.5% in H1 2018 from H1 2017).
Lightning strikes recently interrupted electricity provision from the AES Andrés plant, the county’s largest. The 300 megawatt plant supplies 15% and 20% of all national demand. Though 110 megawatts are to be restored soon, the event underscores the fragility of the country’s energy base.
The Council of Ministers has sent its 2019 proposed budget to Congress. Though the full document hasn’t yet been released, key figures show that the target deficit for the NFPS will be DOP 75.6 billion, equivalent to 1.7% of projected GDP. This would mean a 0.5% GDP cut from the 2018 target.
Political tensions have dissipated, after the approval of the law of political parties. But the electoral board is facing difficulties enforcing the law, and the bill on the electoral system is stalled in Congress. Minister of Education and former Minister of Foreign Affairs Andrés Navarro is likely to launch his campaign for the PLD presidential nomination in December, for the 2020 national elections.
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