Raúl Ovalle said that the construction sector is the most important in terms of contributing to the country's growth and one of the largest in the entire region.
SANTIAGO– Economists Magín Díaz and Raúl Ovalle warned yesterday that the release of the 35 billion pesos authorized by the Monetary Board for the construction and acquisition of housing will only achieve a temporary reduction in interest rates, not in the long term.
“The rates in the sector will go down at least for a while, but in 2023, by June, the program that was announced was not RD$35 billion, it was RD$94 billion, it was more than double, and at that time the rates went down for 6 months and then they had to withdraw the increase,” Ovalle explained while giving the lecture “Perspectives of an economy without reform: Key challenges of the construction sector”, organized by the Association of Promoters and Builders of Cibao (Aprocovici).
He opined that for a decrease to occur, the Central Bank of the Dominican Republic will need to expand the scope of the program that was just announced, which consists of releasing funds from the legal reserve to boost the growth of the construction sector.
Magin Díaz, Sandy Rodríguez and Raúl Ovalle. Fidel Pérez/El Inmobiliario.
For his part, Magín Díaz considered that, given the current economic scenario, interest rates could only fall for six months. “Interest rates aren't going to fall. They'll fall for six months now, and then they have to rise because the Central Bank has to balance an economy with a deficit of RD$300 billion every year,” the economist stated.
He added that rates may temporarily decrease when the Central Bank intervenes, but afterwards they have to return to a high interest rate equilibrium.
Analyzing the country's economic outlook in the absence of tax reform, Díaz stated that "there is a risk that public investment will continue to decline. In other words, there are consequences," he said.
Good prospects
Ovalle explained that the good news for the country is the IMF's outlook that the Dominican Republic's growth will reach around 5.1%, which will allow it to maintain its position as the seventh largest economy in the region.
Regarding the construction sector, he explained that a positive aspect is that, according to reports from the Central Bank, it remains the third fastest growing sector during the first months of the year.
“And it’s almost back to its trend growth, but without a doubt, when you evaluate the data month by month, you start to perceive a certain slowdown,” he commented.
He stated that at the end of last year, the Dominican Republic's construction sector accounted for 14.7% of the Gross Domestic Product (GDP). "After Panama, it is the largest in the Latin American region, and if I were to look at it in nominal terms, which is close to 17 billion dollars, that is more than the entire GDP of Jamaica and more than the combined GDP of the construction sectors of Panama, Costa Rica, and Nicaragua. In other words, it is the most important sector in terms of its contribution to our country's growth and one of the largest in the entire region.".
Santiago's potential
He highlighted that the Cibao region represents almost 40% of the Dominican Republic's entire construction GDP, while mortgage lending is growing at 14% in the northern region and the delinquency rate is close to historic lows.
“In the case of loans to builders, we are seeing that loans to buyers in the Cibao region are growing by almost 67%. Nationally, they are growing by about 30%, meaning that in the Cibao region they are growing at twice the rate,” the specialist pointed out.
He said there is a demand that is justifying this enormous growth that is taking place in the Cibao region.
The event, held at the UTESA Convention Center, was attended by more than 200 businesspeople and representatives from the construction sector in the Northern region.
It was sponsored by Banco Popular, Banreservas, Asociación Popular de Ahorros y Préstamos, Asociación La Nacional de Ahorros y Préstamos, Grupo Therrestra, Asociación Cibao de Ahorros y Préstamos, Grupo Estrella, among others.
