Russia-Ukraine conflict puts growth prospects in question mark

The local economy has managed to move successfully in the face of adverse conditions; the current context presents him with a new test.

The military conflict between Russia and Ukraine could affect growth prospects for 2022 globally, and the Dominican Republic is not exempt from it.

The Central Bank of the Dominican Republic (BCRD) warns that this situation has significantly increased the uncertainty of the international environment, due to its impact on world economic conditions, including trade flows and the increase in oil prices and other commodities.

The agency made it clear that it will continue to monitor the adverse effects of this new shock on the Dominican economy in order to adopt the pertinent measures to help mitigate it. In the local case, the current year got off to a good start in terms of the behavior of the different variables that are measured and in January the Monthly Indicator of Economic Activity (IMAE) registered a year-on-year expansion of 6.3%.

The result was better than expected in the context of an accelerated spread in the country of the omicron variant of covid-19 during the first month of the year.

This fifth wave of contagion caused significant work absenteeism due to the peak registered in the number of active cases of the virus, given the faster transmission of the variant with respect to the previous ones, although with a lower lethality. Despite what has been happening, the Monetary Program of the Central Bank projects that growth would be around 5.5%-6.0% in 2022, close to its potential.

In detail, the behavior of the economic activity by sector, in January of the current year was as follows: hotels, bars and restaurants grew 28.9%, other service activities (9.9%), commerce (9.3%), transport and storage (9.2%). ), energy and water (7.0%), communications (6.9%), financial services (5.7%), health (5.7%) and manufacturing of free zones (5.0%), among others.

The bank indicated that the performance of the hotels, bars and restaurants activity responds fundamentally to the 158.6% increase in the arrival of non-resident passengers during January 2022, for a total of 530,952 tourists in the first month of the year.

The demonstrated resilience of the Dominican economy will be a preponderant factor to face the new uncertain scenario that is given by the existence of adverse conditions in the external environment, which become more challenging, given the escalation of geopolitical conflicts and the persistence of inflationary pressures. at a global level, says the issuer in the report released to the press, economic agents and the general public.

The increase in value added in trade and transportation and storage activities is closely linked to the dynamism in the production, distribution and marketing of agricultural and manufactured goods of local and imported origin. The joint contribution of these two activities to the growth of the IMAE in January was 28.4%, that is, 1.8 percentage points of the 6.3% year-on-year increase referred to above.

Making beverages with good performance

In relation to the manufacturing industries destined mainly for local production, they registered in January 2022 a growth of 2.2% in their real value added, compared to the same month of the previous year. Particularly, the production of beverages and tobacco derivatives, oil refining, manufacturing of chemical substances and products and non-metallic minerals show favorable performance.

“This behavior is consistent with the IMAM prepared by the Association of Industries (AIRD)”, says the BCRD.

Remittances, exports and FDI stand out

Official statistics indicate that in the external sector the good performance of exports and foreign direct investment (FDI) continues; as well as remittances, which reached US$759.3 million in January and it is estimated that they would again exceed US$700 million in February, above the pre-pandemic average.

International reserves remain at historically high levels, around US$14.8 billion, equivalent to 14.9% of GDP and 7.2 months of imports.

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