The evaluations of international organizations give it a good score and are sure that it will continue to grow
In a context of world upheaval, the Dominican Republic continues to stand out and is seen in the projections and analyzes of international organizations, which, based on the resilience of the local economy, continue to take it as a fact, betting that it will follow the path of growth.
The International Monetary Fund (IMF), the Economic Commission for Latin America and the Caribbean (ECLAC), the World Bank (WB), the risk rating agency Standard & Poor’s (S & P Global) and the Inter-American Bank have pointed towards this line. of Development (IDB), which has come to define this country as the holder of the third most dynamic economy in Latin America and the Caribbean in the last decade, classifying itself as a country with upper middle income.
The World Bank maintains its projection that the Dominican Republic will grow 5% in this 2022 and also in 2023, despite the fact that it forecasts that world growth will fall from 5.7% in 2021 to 2.9% in 2022, a considerably lower percentage than the 4.1 % that was anticipated in January.
In the World Economic Outlook report for the month of June, the World Bank highlights that “as an aggravating factor of the damage caused by the covid-19 pandemic, the Russian invasion of Ukraine has exacerbated the slowdown in the world economy, which is entering what is could turn into a protracted period of low growth and high inflation (stagflation).”
In a broader look, the World Bank has downgraded its outlook for the global economy, highlighting Russia’s war against Ukraine, the prospect of food shortages and fears of the possible return of “stagflation,” a toxic mix of high inflation. and low growth not seen for four decades.
The 189-member country anti-poverty agency forecast on Tuesday that the global economy will grow 2.9% this year, compared with 5.7% globally in 2021 and 4.1% forecast for 2022 in January. It means that the Dominican economy will be like an economy with a greater rebound than that of the world as a whole. For the United States, the World Bank has reduced its growth forecast to 2.5% this year after 5.7% in 2021 and 3.7% forecast in January. For the 19 European countries that use the euro, he lowered the forecast to 2.5% this year, compared with 5.4% last year and 4.2% expected in January.
On the ECLAC side, an economic growth of 5.3% is predicted for the Dominican Republic, a number that is consistent with the projections of other institutions. In its most recent review and analysis, which includes what has caused the Russian-Ukrainian war, the economic projections for the Latin American and Caribbean region translate into slow economic growth, more inflation, higher interest rates and a possible stagflation in countries that cannot face the difficulties in logistics chains, the regional body has said.
In its recent report, entitled “Repercussions in Latin America and the Caribbean of the war in Ukraine: how to face this new crisis?”, it warns that the region is facing internal contexts characterized by a strong economic slowdown, increases in inflation and a slow and incomplete recovery of the labor markets, which increases the levels of poverty and extreme poverty.
It calculates, after the economic expansion observed in 2021 (6.3% growth of the regional Gross Domestic Product (GDP), that the region will reach an average annual growth of 1.8% in 2022 and tends to return to the slow growth pattern of 2014-2019 (only 0.3% annual average, with the consequent drop in GDP per inhabitant).
“The good news for the Dominican Republic is that, as a result of its geographical location and the business and investment climate, it has been able to face external pressures that affect economic dynamism, diversifying trade relations,” ECLAC said.
What signs does the bottom see?
An IMF team visited the Dominican Republic, between April 29 and May 13, 2022, to carry out the 2022 Article IV Consultation. At the conclusion, that mission assured that the country’s economy demonstrated remarkable resilience in the face of global shocks, which was based on appropriate policies, including the support of monetary policy, an agile vaccination campaign against covid and a reopening that allowed it to take full advantage of the reactivation of the world economy last year.
This resilience and the firm signs of policy sustainability -said the IMF- are placing the Dominican economy in a good position to face the emerging international challenges. “The economy has shown a vigorous recovery after the pandemic, despite global factors that have created challenges in terms of inflation. Real GDP increased by 12.3 percent in 2021, thanks to a diversified sectoral growth, including the notable recovery of construction and tourism, which as of last fall have had a number of visitor arrivals higher than 2019 levels. , highlighted the IMF mission that visited Dominican soil.
(…) “The economic outlook indicates that the recovery will continue, despite the risks posed by world events.
GDP growth would converge to 5% -around its potential- and inflation is expected to return to the target range next year as the impact of global shocks diminishes, in a context of financial stability and a solid external position ”, indicated the International Monetary Fund.
And he added: “The pandemic, although well contained in the Dominican Republic, could affect growth in other regions. And the tightening of monetary policy in the United States could have a larger-than-expected impact on capital flows.”
Central Bank Response
According to the Fund, these shocks are creating fiscal and monetary policy challenges in the country. “The authorities have responded appropriately with temporary measures while maintaining budget discipline through spending control, and timely and proactive debt management that has reduced financing risks. In addition, the Central Bank has initiated the necessary normalization of monetary policy, both by way of absorbing liquidity and by increasing the monetary policy rate, “said the IMF.
Meanwhile, the risk rating agency Standard & Poor’s (S & P Global), in its report dated December 2, 2021, reported that the credit outlook for the Dominican Republic rose from negative to stable in the face of an impressive economic recovery that has reversed the external deterioration caused by covid-19.
By then, Standard & Poor’s highlighted that this improvement is a sign of the dynamism of the Dominican economy, compared to its peers with similar levels of development.
In addition, he pointed out that the evolution of the tourism sector is going much faster than expected, which is backed by the strong vaccination campaign against covid.
The agency estimates -in its report from last December- a favorable economic growth and the continuity of public policies for the next 12 to 18 months. On that occasion, the base scenario that the rating agency handled for this year 2022 was that the GDP will grow by 6% and around 5% for the following years, driven by private sector investment.
Another factor that supported Standard & Poor’s decision to improve the credit risk outlook was the solid fiscal consolidation achieved by the Dominican government in 2021, after the sharp increase in the fiscal deficit and debt levels last year.
The Inter-American Development Bank, in a document entitled Strategy of the IDB Group with the country 2021-2024 (December 2021), highlights that in the last decade the Dominican Republic was the third most dynamic economy in Latin America and the Caribbean, classifying itself as a country with income medium high.
“Between 2013 and 2019, the country grew an average of 6% per year in a context of macroeconomic stability. However, growth has had little support in productivity gains, the institutional framework has not advanced at the same rate as the economy (…) ”, he indicates. He highlights the improvement of the economy in 2021.
IMAE and behavior in the first quarter
The Dominican economy grew by an average of 5.8% during the first quarter of the current year, showing a level of expansion above potential and with a strong growth in tourism whose added value increased by almost 40%, according to official data from the Central Bank.
“It is consistent with the growth of 6.1% experienced in the first quarter and the year-on-year variation of 4.7% evidenced in the month of April 2022,” said the issuer, in a document sent to the media and economic agents.
The international risk rating agency Moody’s has also joined the entities that highlight the good performance of the economy of the Dominican Republic, “reaffirming that the country’s prospects remain favorable, projecting growth in gross domestic product (GDP) around to 5%, in line with the forecast system of the Central Bank”.
5% locally
The world bank forecasts that global growth will decline this year, but maintains the “positive note” for this country.
