SANTO DOMINGO.- Economist Alejandro Arredondo's perspective is that in the coming year, 2024, there will be greater dynamism in the local construction sector, because the growth rate of the
Dominican economy will be much higher than the one that will close this year.
"Looking ahead to 2024, we can expect greater dynamism in the construction sector because the growth rate of the Dominican economy will be much higher than the current rate, which
is around 2.2 to 2.5%. Next year, the Dominican economy is projected to grow by 4.75%, and this will have a positive impact on the sector," the financial specialist said in response to questions from El Inmobiliario about the sector's projections for next year.
He said that the statistics from the final months of the last three years show that the sector is regaining some dynamism, because many debts are being paid off and even more so, given that 2023 is a pre-election year, that growth will be maintained, at least as far as the private sector is concerned.
"It must be said that the same thing is not happening in the public sector as capital investments (infrastructure constructions), they do not have the same behavior, they remain timid," the professional explained.
Arredondo praised the growth experienced by the construction sector in recent months, stating that it has gone from red to blue and that the figures provided by the Central Bank indicate that the Dominican economy remains dynamic, "as it has been doing since August, which grew 2%, and September 3.1%, meaning that in these last 3 months there is a clear upward trend.".
One challenge that the country's monetary authorities understand is to achieve a reduction in interest rates at financial institutions, which are still high, "and therefore discourage the growth of this sector that so greatly energizes the Dominican economy.".
In his opinion, the implementation of a new Rapid Liquidity Facility (FLR) announced this week by the governor of the Central Bank of the Dominican Republic (BCRD) for an amount of RD$25 billion will contribute to the dynamism and growth of the sector, with the objective of fostering favorable financial conditions for economic recovery and supporting the agricultural, commercial, and construction sectors, which were significantly affected by the damage caused by the tropical disturbance that occurred on Saturday, November 18.
Economist Alejandro Arredendo. (External source)
He highlighted that the construction sector, after having had negative or red numbers for much of the year, in the January-March (-4.7%) and April-June (-0.4%) quarters, has rebounded due to the controlled expansionary monetary policy that has been implemented by the Central Bank of the Dominican Republic (BCRD) to bring the Inflation Rate to the Target Range of 3% to 5% established in the 2023 Monetary Program.
He explained that the construction sector, starting in the July-September quarter, began to show positive or blue numbers, with a growth rate of 5.5%, and now in the past month of October the Monthly Indicator of Economic Activity (IMAE) was 4.7%.
He said that the positive figures in the construction sector are largely due to the more than RD$150 billion in liquidity provided by the Central Bank of the Dominican Republic (BCRD), which has gone to the construction sector at an interest rate of 9%, considerably below the 14.4% average weighted active interest rate that exists today.
He reiterated that the availability of financing at an interest rate of 9% for the construction sector is having a positive impact on the 4.7% variation of the IMAE.
4 months rising
For the fourth consecutive month, the construction sector exhibited positive variation rates, reaching a 4.7% year-on-year growth in October of this year, according to data from the Central Bank of the Dominican Republic.
“An important aspect to highlight is that the construction sector, which has a significant multiplier effect and pull on other economic sectors, has shown positive growth rates for the fourth consecutive month. This reflects the effectiveness of the liquidity provision measures implemented by monetary authorities to accelerate the transmission mechanism of monetary policy, as well as the faster pace of execution of public capital spending compared to the same period last year and the stabilization of input prices used in this activity,” the Central Bank stated in a press release on November 24.
