Taken from Diario Libre
SANTO DOMINGO – Monetary policy decisions continue to impact the financial market. The Ministry of Economy reports that interest rates rose again in July. The active rate (for loans) reached 12.20%, and the passive rate (for deposits) increased for the second consecutive month, reaching 8.62%.
Despite rising lending rates, funds channeled to the private sector saw accelerated growth of 15.1% in July. According to the Ministry of Economy, this was primarily driven by loans to the productive sectors and for consumer spending.
In its most recent macroeconomic situation report, the Ministry of Economy reports that the active rate registered a monthly increase of 0.14 percentage points, to stand at 12.20%, but remaining below the average of the last nine years (13.39%).
The passive rate experienced a monthly increase of 1.59 percentage points.
These combined movements resulted in a 1.45 percentage point drop in the intermediation margin, closing at 3.57%, reported the Ministry of Economy.
Since the end of 2021, the Central Bank of the Dominican Republic has been increasing its monetary policy interest rate as a measure to counteract inflationary effects. It has raised it from 3.00% annually in November to the current 7.75%, the highest rate since January 2009, when it was set at 8.50%.
The Dominican Republic's Multiple Banking Association explains that when the monetary policy interest rate rises, it generates a gradual increase in interest rates for different types of credit and deposit products in the financial system, depending on whether they are contracted at a fixed or variable rate.
Evolution of loans
Loans to various productive sectors and to consumption boosted the 15.1% growth in July of funds channeled to the private sector, in national and foreign currency.
According to the Ministry of Economy's report, mortgage loans also played a significant role, accounting for 20.1% of the change.
“The consolidation of private consumption and the dynamism of the productive sector – he adds – are reflected in the absolute year-on-year increase in the different lines of credit: loans destined for consumption (73.5 billion), for the acquisition of homes (42.1 billion) and for wholesale and retail trade (22.4 billion).”.
In its report on the performance of the financial system in the first quarter of 2022, the Superintendency of Banks highlighted that loans had shown an increase in their rates, going from an average of 9.0% in December 2021 to 10.2% in March 2022.
It also reported an increase in the trade rate compared to the previous quarter, registering a level of 9.3% in March.
Bank default
Regarding bank delinquency, this stood at 1.03% in June, for a monthly reduction of 0.06 percentage points, explained in large part by the 4.9% decrease in the portfolio of loans overdue by more than 90 days, the report indicates.
“This marked and sustained downward trend reflects a considerable improvement in the fulfillment of financial obligations by economic agents,” the Ministry of Economy indicates.
