SANTO DOMINGO - 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 reported yesterday by the Central Bank of the Dominican Republic.
The agency states in a press release that this increase "reflects the effectiveness of the liquidity provision measures with securities as collateral implemented by the 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 in the prices of inputs used in this activity.".
“An important aspect to highlight is that the construction sector, which has a significant multiplier effect and pull on other economic sectors, exhibits positive variation rates for the fourth consecutive month, reflecting the effectiveness of the liquidity provision measures with securities as collateral implemented by the 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 in the prices of inputs used in this activity,” the Central Bank maintains.
The report states that during the current year, the aforementioned measures have resulted in loan disbursements of approximately RD$158 billion at rates no higher than 9.0% annually. These measures, combined with a 125-point reduction in the monetary policy rate, have led to a reduction in the weighted average of loan interest rates of approximately 200 basis points, which signifies a more than complete transfer of the monetary policy signal to market rates.
The preliminary results of the Dominican economy for October 2023 offered by the BCRD, highlight that the monthly indicator of economic activity (IMAE) registered a year-on-year expansion of 3.6% in October 2023, "the highest monthly rate of this year, after having registered a year-on-year growth of 2.6% in the third quarter of 2023.".
The above indicates—according to the agency—that the monetary policy transmission mechanism is operating favorably and that the Dominican economy continues its recovery process, so that it would be reaching its potential growth rate in the next year 2024 according to the Central Bank's forecasting system.
“When analyzing the IMAE in accumulated terms, it is observed that it registered an average variation of 1.9% during January-October 2023 compared to the same period in 2022, with hotels, bars and restaurants, with an expansion of 10.8%, being the activity that contributed most to growth this year, explaining approximately 40.0% of it.
The year-on-year growth in October is mainly explained by the performance of the activities hotels, bars and restaurants (9.0%), financial services (6.4%), construction (4.7%), agriculture (4.1%), free zone manufacturing (3.4%), trade (2.8%), local manufacturing (1.5%), among others.
It adds that the growth in the real added value of the Hotels, Bars and Restaurants activity is mainly explained by the arrival of tourists by air, which amounted to an unprecedented total of 6,554,589 visitors in January-October 2023.
“It should be noted that, considering the arrival of 1,696,711 cruise passengers by sea in October, the total number of visitors to the country in the first ten months of the year reached 8.3 million, a historic record according to figures reported by the Ministry of Tourism. It is projected that the total number of visitors, that is, tourists arriving by air plus cruise passengers arriving by sea, will exceed 10 million by the end of 2023, representing foreign exchange earnings for the country of more than US$10 billion.”.
Regarding financial intermediation activity, it exhibited a year-on-year variation of 6.6% in its real value added from January to October 2023. This performance was influenced by the 19.3% year-on-year expansion of credit granted to the private sector in local currency as of the end of October 2023, equivalent to an absolute increase of RD$255,929 million in loans channeled.
Analyzing agricultural activity, a year-on-year growth of 3.9% was observed from January to October 2023. The sector's performance is attributed to increased production of key domestic consumption items such as plantains, chicken, and eggs, among others. Key to this performance have been the measures implemented by the Government, through the Ministry of Agriculture and its agencies, which have provided technical and financial support to agricultural producers nationwide and ensured the country's food security.
"Finally, the strength of the macroeconomic fundamentals and the resilience of the productive sectors of the Dominican economy allow it to continue advancing on the path of economic reactivation, in a context in which inflation would remain in the target range of 4.0% ± 1.0% over the monetary policy horizon," the Central Bank concluded.
