The announcement of the release of legal reserve by the Central Bank of the Dominican Republic (BCRD) is seen as positive for stimulating economyespecially in the sector construction. However, as economists point out, its success will depend on the ability to address structural obstacles, such as labor shortages and the effectiveness of monetary policy transmission.
On the other hand, Steven Puig, executive president of the BHD Bankand René Grullón, senior vice president of the Dominican Popular Bankagreed that the measure will help reduce active interest rates, promoting greater liquidity in the financial system.
“It’s good that he already Central Bank made the decision because, although the rate of monetary policy has fallen, the real has not, because liquidity has not yet been seen in the system, in the overnightin the liquidity surpluses of the entire complete system, so that the deposit rate drops. So, if the passive rate does not go down, the active rate typically does not go down,” said Grullón.
He specified that the measure of the release of legal reserve create a mechanism Central Bank to “accelerate a little the process of lowering active rate that the country needs so much.
For economist Haivanjoe Ng Cortiñas, the release of reserve requirements responds to the lack of effectiveness in the transmission of the reduction in monetary policy rate to bank interest rates.
Even though he Central Bank decreased its reference rate from 8.5% to 6.25%, active rates banking rates have risen, going from 12.41% in June 2023 to 16.20% currently.
He said that he construction sectorkey in the economyhas shown a growth of 4.7% in the first ten months of 2024, a figure lower than the 10% recorded in 2019 before the pandemic.
- The Monetary Board authorized the Central Bank of the Dominican Republic (BCRD) announced yesterday the release of 35,335 million pesos from the legal reserve. These resources seek to stimulate the construction and housing acquisition, with a special focus on low-cost housing.
- 40% of the funds, about 14,142 million pesos, will be allocated to homes whose current price does not exceed 5,025,380.75 pesos, while the remaining 60%, 21,213 million pesos, will be for construction projects and home acquisition in general.
Guillermo Caram: underlying problems in construction
Economist Guillermo Caram highlighted that, although the measure is positive, the industry faces more urgent challenges, such as labor shortages due to the deportations of haitian workers.
“The construction It will not be reactivated until the main problem that is now affecting that industry is resolved: the shortage of labor as a consequence of the arbitrary government deportations of Haitians,” the economist says.
Caram suggests that without addressing this problem, financial facilities could be ineffective, and warns of the risk that the funds will be used to refinance arrears, which would improve banking statistics without generating a real impact on the economy.
“There would be a risk that the facilities that this (BCRD) grants will be used to refinance overdue financing for the purposes of reduce the delinquent portfolio that affects the image of the commercial banks“Caram warned.
Haivanjoe Ng Cortiñas: need for monetary stimulus
On the other hand, Ng Cortiñas reinforces the need for the measure, arguing that it seeks to correct the lack of transmission of the monetary policy and support a sector that, although key, continues to lag behind pre-pandemic levels.
“Given the fact of the failure of the transmission effect of the monetary rate towards bank interest rates, Central Bankthere has been no other way but to release the reserve, in an environment of inflation below the target and in the face of an insufficiency of circulating monetary mass, lower than the monetary program,” he expressed.
Copymecon: support and opportunity to MSMEs
The Dominican Confederation of Micro, Small and Medium Enterprises Construction Companies (Copymecon) expressed its support for the measure, highlighting its potential to energize the sector.
However, the president of CopymeconEliseo Cristopher, stressed the importance of prioritizing the access of MSMEs to these resources, given their crucial role in the economy and the development of construction on a smaller scale.
Acoprovi supports the decision of the Monetary Board
The Dominican Association of Home Builders and Developers (Acoprovi) welcomes and supports the decision of the Monetary Board that authorizes the Central Bank of the Dominican Republic (BCRD) the release of 35,335 million pesos from legal reserve to facilitate loans for construction and home acquisition.
“This announcement represents a significant step towards strengthening the access to housing and the revitalization of the constructionessential pillars for the economic and social development of the country,” indicates Acoprovi.
The banks
Steven Puig, executive president of the BHD Banksaid the measure should encourage a reduction in rates.
“It seems to me that they were very wise measures, very timely, very necessary as well, precisely to stimulate the economy. We are going to end the year with very good news,” said Puig.
He said that the governor of Central Bank “He also announced to us that we are going to grow more than 5%, obviously, by the end of the year. So I think it was a very timely stimulus and that it will serve as a good basis for us to enter 2025 with guarantees.”
René Grullón, senior vice president of the Dominican Popular Banksees it as something necessary for the sector construction for all the positive repercussions that economy.
Amchamdr
The president of the American Chamber of Commerce of the DR (Amchamdr), Roberto Herreraconsidered that the announcement of the release of legal reserve for housing is “very positive” because it will boost the housing sector construction.
“I understand that there were some challenges they had for not having access to financing and I think that that is going to be very positive for the economy“said the businessman.
