The expansion of the IMAE in January-July places the Dominican Republic as the economy with the highest year-on-year increase compared to its Latin American peers.
SANTO DOMINGO. -The Central Bank of the Dominican Republic (BCRD) reported the preliminary results of economic activity for July 2024. The monthly indicator of economic activity (IMAE) registered an expansion of 4.8% during the month of July of this year, accumulating an average year-on-year growth of 5.0% in the first seven months of 2024.
According to the regulatory body, this performance has occurred within a context of price stability resulting from implemented monetary and fiscal policies, which have allowed for the timely mitigation of risk factors for the Dominican economy.
In this regard, it is important to emphasize that the observed trajectory of economic activity demonstrates the resilience of the national productive sector in the face of the current global context, in which interest rates in international markets remain relatively high compared to initial projections at the beginning of the year. Furthermore, the expectations of economic agents have been affected by the uncertainty associated with geopolitical conflicts in the Middle East and Eastern Europe, which has resulted in greater volatility in commodity prices.
Despite this global outlook, the United States of America (USA), the country's main trading partner, has shown positive signs in its key macroeconomic indicators. In this context, expectations for a possible easing of international financial conditions remain favorable, given a clearer picture of upcoming adjustments to Federal Reserve (Fed) policy that would not alter the inflation trend toward the 2% target. This has been supported by the Fed Chairman, who, in his most recent address at the annual economic conference in Jackson Hole, Wyoming, stated that "the time has come for policy to tighten" and that interest rate cuts will be contingent on the short-term evolution of the outlook and the balance of risks. Indeed, this would provide greater flexibility to implement monetary policies domestically, supporting economic growth without compromising the inflation target.
In addition, the expansion of the Monthly Index of Economic Activity (IMAE) in January-July positions the Dominican Republic as the fastest-growing economy year-on-year among its Latin American peers, according to the latest available data published by the countries. This result is also in line with the forecasts of various international organizations, which place the country as the leader in terms of economic activity growth in the region by the end of 2024. Indeed, the latest projections from the International Monetary Fund (IMF) estimate the country's GDP growth for this year at 5.1%, those from the World Bank at 5.1%, and those from the Economic Commission for Latin America and the Caribbean (ECLAC) at 5.2%.
The 5.0% year-on-year increase in January-July 2024 was driven by activities such as construction (4.6%) and free trade zone manufacturing (6.4%), with exports under this regime reaching US$4,965.5 million during that period. Likewise, services activities as a whole showed a cumulative increase of 5.4% compared to the same period of the previous year, with real estate and rental activities (5.9%), transportation and storage (5.9%), communications (5.3%), and hotels, bars, and restaurants (8.0%) standing out. The latter was largely supported by the arrival of 5,286,325 tourists by air during the first seven months of the year.
It should be noted that in July 2023, the hotel, bar, and restaurant sector experienced a year-on-year expansion of 9.3%, so the 3.8% growth in July 2024 compared to the same month last year is partly due to the statistical effect of the base of comparison. Nevertheless, July 2024 was the highest in absolute terms for that month in the entire historical series, with 811,192 non-resident air passenger arrivals, and it is projected that the year will close with a total of 8.6 million tourists entering through the country's various airports.
In other news, agricultural activity showed a year-on-year growth of 4.2% in January-July of this year, with notable increases in the production of plantains, bananas, avocados, chicken, eggs, and other crops. In this regard, the technical and financial support provided to agricultural producers nationwide by the Government through the Ministry of Agriculture has made a significant contribution.
Regarding financial intermediation activity, it showed a year-on-year variation in its real added value of 8.0% in January-July, this result being influenced by the year-on-year expansion of 15.3% of credit granted to the private sector in national currency, equivalent to an additional RD$230,838.2 million compared to July of the previous year.
Finally, the Dominican economy is well positioned to maintain a growth rate around its potential, taking into account the strength of its macroeconomic fundamentals, the resilience of the productive sectors, and the improvement in country risk indicators in international markets.
