Although the figure was lower than in January, it shows that in a turbulent world, the country continues to sail well
The Dominican economy registered a good performance last February, when the Monthly Index of Economic Activity (IMAE) expanded 5.8%. It is 0.5 percentage point lower than that registered in January (6.3%), but in any case it remains within the projections that have been made.
It is a positive increase, if it is assumed that the monetary program of the Central Bank of the Dominican Republic projects that growth will be around 5.5%-6.0% in 2022, close to its potential.
And it has made clear the importance of highlighting that the military conflict between Russia and Ukraine has significantly increased the uncertainty of the international environment, due to its impact on world economic conditions. That includes trade flows and rising oil and other commodity prices, which could affect growth prospects for 2022.
Yesterday, for example, Texas crude closed the day at 99.27 dollars a barrel. Although it was down, it remains high. The 2022 Budget was made taking an assumption of 62.7 dollars per barrel. Meanwhile, international grain prices closed the first three months of 2022 on the rise, with increases of more than 20%. In that period, the biggest gains were for wheat, which rose 30.78% to $10.08 a bushel. The second largest increase was for corn (26%) closing at 7.48 dollars per bushel.
The bushel is a unit of measurement of capacity for solid merchandise in Anglo-Saxon countries (English-speaking countries). It is used in the trade of grains, flours and other analogous products. In the United States it is equivalent to say 32 pounds = 14.5 kilos. One kilo is the equivalent of 2.2. Pounds.
Between January and March of this year, soybean futures had an increase of 21.71% and as of March 31 they were trading at 16.17 dollars per bushel.
According to what was explained by analysts, both local and from other nations, the increase in grain prices was driven by the conflict in Ukraine and Russia and unlike other raw materials, production efforts cannot significantly accelerate growth harvests, hence the conflict in grain supply.
In the Dominican case, the Central Bank has said that it will continue to monitor the adverse effects of the new shock on the Dominican economy in order to adopt the pertinent measures to help mitigate it.
Due to what is happening, due to the high uncertainty prevailing in the international environment, the growth prospects of the Dominican economy have become more conservative going forward. The Dominican Central Bank has highlighted that it should be taken into account that the variation rates of the IMAE for the coming months could be more moderate than those registered at the beginning of this year, influenced by the statistical effect of the basis of comparison, particularly in the months of March, April, and May, which were the months with the highest growth in the past year, of the order of 10.6%, 47.1% and 21.2%, respectively.
“In a scenario where the risks derived from the geopolitical confrontation remain limited, the forecast models of this institution indicate that growth for this year would be around 5.0%, close to its potential, as contemplated in the review more of the Monetary Program”, said the issuer.
The Credit Question
On the other hand, credit to the private sector in national currency maintains its dynamism, expanding year-on-year above 12% in the month of March.
Regarding fiscal policy, the BCRD figures highlight the higher collections in relation to what was estimated, which have provided the necessary space for the reactivation of capital spending and to apply measures aimed at mitigating the impact of higher international prices of raw materials on national production and households, especially the most vulnerable.
As for international reserves, they remain at historically high levels, around US$14.4 billion, equivalent to 14.5% of GDP and 7.1 months of imports, exceeding the metrics recommended by the International Monetary Fund (IMF).
These factors have favored the relative stability of the exchange rate, reflected in a year-on-year appreciation of the local currency of around 3.5% at the end of March, which would help offset inflationary pressures from abroad.
“The Dominican economy is in a good position to mitigate this adverse shock, taking into account the strength of the macroeconomic fundamentals, the good performance of domestic demand and the high levels of international reserves,” indicates the BCRD.
And it continues to reaffirm its commitment to conduct monetary policy towards the achievement of its inflation target and the proper functioning of the financial and payment systems, for which it will continue to monitor the international situation and inflationary pressures, with the purpose of adopt additional measures in the face of factors that could put price stability at risk.
wide view outside
In the external sector, the dynamism of exports and tourism continues; as well as remittances that exceeded US$1,500 million during the first two months of the year. In this sense, the updated projections point to a Current Account deficit of around 3.0% of GDP for this year, taking into consideration that the higher exports of gold and nickel, as well as the continuous recovery of tourism, would partially offset the impact of higher oil prices.
“Additionally, it is important to highlight that foreign direct investment is projected to be around US$3.4 billion, which would cover the estimated current account deficit,” the Central Bank said in a document issued on Thursday.
