In an analytical document prepared by technicians from the central bankit is recognized that the slowdown in inflation in the country has occurred at a slower pace than expected. However, it is projected that the momentum shown by domestic demand, the recovery of tourism, the high flows of foreign direct investment and the revitalization of public investment will contribute to the Dominican economy growing up to 6.0% in 2022.
In a document entitled “Rate of monetary politics: main tool of central banks”, the institution’s technicians explain that, in Latin America, most central banks have had to increase their interest rates more quickly to face the high inflationary pressures and depreciation of their currencies. , as well as to avoid potential capital outflows.
They cite that in the region the increases since the beginning of 2021 in the interest rates of monetary politics Brazil (875 basis points), Chile (500 basis points), Paraguay (475 basis points), Peru (275 basis points), Colombia (225 basis points), Uruguay (200 basis points), Mexico (125 basis points ) and Costa Rica (100 basis points).
In the case of the Dominican Republic, they indicate that the inflationary dynamic has been mainly affected by factors of external origin. In this sense, after reaching a year-on-year maximum of 10.48% in May 2021, the inflation it has gradually moderated to 8.50% year-on-year as of December 2021, although the deceleration has occurred at a slower pace than expected.
“Given this panorama of more persistent inflationary pressures and a greater than expected dynamism of economic activity”, growing by 12.3% during 2021 and 4.7% compared to the level of production in 2019 (prior to the pandemic), the technicians point out that the central bank implements a monetary normalization plan to facilitate the convergence of the inflation to the target range.
In this sense, the issuing entity has increased its rate of monetary politics by 200 basis points between November 2021 and January 2022, which places it at 5.00% per annum.
“Despite the challenges arising from a complex international environment, the Dominican economy will continue to show its resilience, projecting GDP growth between 5.5% and 6.0% for this year 2022, slightly above its potential”, indicate the technicians.
“All the advanced economies and those of the region are reacting proactively -he adds-, increasing their interest rates. monetary politics to mitigate inflationary pressures, caused mainly by external factors such as increases in oil and other commoditiesin addition to higher costs in global container shipping.”
