SANTO DOMINGO. -The monthly indicator of economic activity (IMAE) registered an expansion of 5.6% during the month of August of this year, thus accumulating an average year-on-year growth of 5.1% in January-August 2024, according to the preliminary results of economic activity to August 2024.
The report from the Central Bank of the Dominican Republic (BCRD) underscores that this performance has occurred within a context of price stability, where inflation has remained at the lower end of the target range of 4.0% ± 1.0% this year. This is a result of the monetary and fiscal policies implemented, which have allowed the Dominican economy to effectively manage risk factors.
"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. Economic agents' expectations 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," the report states.
Despite the global outlook, the United States of America (USA), the country's main trading partner, has shown positive signs in its main macroeconomic indicators, highlighting the favorable performance of economic activity, as well as the trend of inflation towards the 2% target set by the Federal Reserve (FED).
In this context, supported by these advances, the institution decided at its most recent meeting in September to reduce its benchmark interest rate by 50 basis points (bps), continuing to monitor the short-term outlook and the balance of risks to determine appropriate future adjustments. This easing provides greater freedom to implement domestic monetary policies that support economic growth without compromising the inflation target.
Furthermore, the expansion of the Monthly Index of Economic Activity (IMAE) in January-August 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, whose projections point to expansion around potential levels and position the country as a leader in terms of economic activity growth in the region by the end of 2024.
The 5.1% year-on-year increase in January-August 2024 was driven by the performance of sectors such as construction (4.9%) and free trade zone manufacturing (6.6%), with exports under this regime reaching US$5,691.4 million during that period. Additionally, services activities as a whole showed a cumulative increase of 5.4% compared to the same period of the previous year, with hotels, bars, and restaurants (7.1%), transportation and storage (5.9%), real estate and rental activities (5.8%), and communications (5.3%) being the most prominent sectors.
It should be noted that, in the specific case of the 5.6% expansion of the IMAE in August, all activities registered positive year-on-year rates. The sectors that showed the greatest growth were: financial intermediation (8.7%), mining (8.5%), free zone manufacturing (8.1%), construction (6.9%), local manufacturing (6.8%), commerce (6.2%), and transportation (6.0%).
Regarding financial intermediation activity, it showed a year-on-year increase in its real added value of 8.1% in January-August, this result being influenced by the 15.2% expansion of credit granted to the private sector in national currency, equivalent to an additional RD$232,425.2 million compared to August of the previous year.
An important point to highlight is that mining grew by 8.5% in August 2024, driven by increased gold production at the country's main mine. Similarly, construction, which has a significant multiplier effect and drives growth in other economic sectors, showed a year-on-year increase of 6.9% in the same month, reflected in the higher sales volumes of the main inputs used in that sector.
It is important to note that the value added of the hotel, bar, and restaurant sector experienced a year-on-year variation of 0.9% in August, largely explained by the moderation in the growth rate (1.5%) of non-resident passenger arrivals by air in that month, due to the statistical effect of the base of comparison, as August 2023 registered a record number of non-resident foreign arrivals. In cumulative terms, the sector's value added grew by 7.1% in January-August 2024, supported by the total number of passengers received in the country through the various airport terminals, which reached 5,961,484 tourists, representing a 7.5% increase compared to the same period of the previous year. Including those arriving by sea, the total number of visitors in the period reached 7,760,518, 9.5% more than in the first eight months of 2023.
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.
