The institution highlighted that the performance of Dominican economic activity during the period January-June 2022 is mainly supported by the sectors that showed higher growth rates in their real added value, among which are: hotels, bars and restaurants (34.3%); health (11.6%); other service activities (10.3%); manufacturing in free zones (8.6%); public administration (8.5%); transportation and storage (8.0%); commerce (6.6%); energy and water (6.3%); and financial services (5.6%), among others.
SANTO DOMINGO.- The economic variables that have emerged in the country in recent months, such as high interest rates, inflation, and the reduction of the money supply, will undoubtedly contract the construction sector this year, according to economists' estimates.
The Monthly Indicator of Economic Activity (IMAE), from the Central Bank of the Dominican Republic (BCRD), places the growth of the construction sector at 2% for the period January-June of this year. In the same period last year, it was 42.2%.
Economist Alejandro Arredondo says the sector “will contract due to the economic slowdown, although he believes that if the government increases investment in public works in the coming months, as it did in the last quarter of last year, the outlook could improve.
For his part, economist Francisco Tavares believes that the construction sector, like other sectors of the national economy, continues to suffer from strong inflationary pressures. “Clearly, the increase in the price of materials and machinery impacts the final prices of housing and infrastructure, which, given the loss of purchasing power among the general population and more expensive credit due to increased interest rates, will necessarily lead to a reduction in the demand for new housing,” he states
Arredondo understands that after the measure taken by the Central Bank, to increase its monetary policy rate again to 7.75 per year, mortgage loans will begin to increase and those with renewable fixed rates will also suffer increases.
“This impacts the growth rates of the construction sector, which slowed to 2% from January to June. It should be noted that the construction sector is the most vulnerable to increases in interest rates,” the economist explained.
Tavares argues that despite the increase in loans for construction and acquisition of homes of 17.7% as of March 2022, "it is expected that when the monetary measures come into effect these results will moderate and reflect the tightening of monetary policy.".
However, he argues that the construction sector has significant resilience, given its production chain, so the sector's growth will slow compared to the previous year but still in line with the 5.0% growth of the economy.
Arredondo believes that housing demand will contract across all income levels. He emphasized the importance of the construction sector in job creation and its key role in economic growth. "Without a doubt, it contributed to the country's economic recovery in 2021.".
Economy grows 5.8% in the first half of the year
The Central Bank reported yesterday that the IMAE registered a year-on-year expansion of 5.8% in June, higher than the 4.8% observed in May and the 4.7% of April 2022, averaging a growth of 5.6% in the January-June period of this year compared to the same semester of the previous year.
Domestically, the outlook remains positive, with a projected expansion of the gross domestic product (GDP) of 5.0%, a rate close to potential, according to the Central Bank's forecasting system and in line with what has been indicated by multilateral organizations such as the International Monetary Fund (IMF) and the World Bank,” the bank reiterated.
The institution highlighted that the performance of Dominican economic activity during the period January-June 2022 is mainly supported by the sectors that showed higher growth rates in their real added value, among which are: hotels, bars and restaurants (34.3%); health (11.6%); other service activities (10.3%); manufacturing in free zones (8.6%); public administration (8.5%); transportation and storage (8.0%); commerce (6.6%); energy and water (6.3%); and financial services (5.6%), among others.
According to reports, national exports saw an 18.9% increase, primarily in the industrial sector, which experienced a 54.1% rise. Steel rods stood out, growing by US$50 million (156.7%), followed by chemical products, which increased by US$26.5 million (35.2%). Within the mining sector, ferronickel exports rose by US$86.4 million (46.9%).
At the same time, remittances reached $4,861.1 million for the January-June period, exhibiting a slight year-on-year decrease of 7.6%, but exceeding 2019 by 40.6%.
In the first half of 2022, tourism revenues totaled $4,121.5 million, a year-on-year increase of 92.5%.
