SANTO DOMINGO –The governor of the Central Bank of the Dominican Republic (BCRD), Héctor Valdez Albizu, announced that the monthly economic activity indicator (IMAE) registered year-on-year growth of 3.1% in September 2023, the highest rate this year. With this result, the increase in real gross domestic product (GDP) for the July-September quarter reached 2.6%, for a cumulative total of 1.7% for January-September.
Valdez Albizu presented the data in his customary address commemorating the institution's seventy-sixth anniversary. He added that, according to the latest available data, "the largest contribution from January to September came from hotels, bars, and restaurants, which grew by 10.9%, maintaining the strong growth seen throughout the year.".
In September alone, the country received 478,792 tourists by air, accumulating a record 6,023,573 non-resident visitors during the first nine months of the year, with a hotel occupancy rate of 75%. If we add to this the more than 1,607,360 cruise passengers who visited the country between January and September, the total number of visitors reached 7,630,933, another historic milestone for tourism.”.
He also noted the remarkable performance of the construction sector in September, a sector with a significant multiplier effect on other economic activities. He emphasized that, after posting negative figures in some months of the first half of this year, largely due to moderate domestic demand and high input costs, construction continued its recovery, expanding 9.5% in September 2023 compared to the same month of the previous year, marking its best performance so far this year. Similarly, the agricultural sector showed a year-on-year increase of 3.4% in September, for a 3.8% increase in January-September 2023.
The governor of the Central Bank of the Dominican Republic (BCRD) emphasized that the international community has recognized the Dominican Republic's economic performance this year as commendable, despite the unfavorable environment. In this regard, he highlighted that just a few days ago, Katie Taylor, director of the Pan American Development Foundation, an independent organization affiliated with the Organization of American States (OAS), affirmed that the Dominican Republic “is a beacon in the hemisphere, with democratic stability, economic stability, and development.”.
Labor Market
On the other hand, the governor announced that the total number of employed reached its highest historical level of 4,855,631 workers in the July-September quarter of 2023, reflecting a remarkable creation of 222,497 jobs in year-on-year terms, according to the latest data from the National Continuous Labor Force Survey (ENCFT) of the Central Bank.
Valdez Albizu stated that the creation of new jobs in the last twelve months was concentrated in formal employment, with a year-on-year increase of 164,498 people in that category, representing 74% of the total increase in employment over the past year. “With these results, the informal employment rate decreased by 1.5 percentage points (pp) in the third quarter of 2023, falling from 58.1% in July-September 2022 to 56.7% in the same period of 2023, and the open unemployment rate stood at 5.4% for the third quarter of 2023,” the governor indicated.
Monetary Policy and Inflation:
The Chairman of the Monetary Board emphasized that the Central Bank's measures, along with government subsidies to mitigate rising commodity prices, reduced inflation from 9.64% in April 2022 to 4.41% in September 2023. Similarly, core inflation, which excludes the prices of the most volatile components of the consumer basket, such as certain foods, fuels, and other items with regulated prices, decreased from 7.29% in May 2022 to 4.68% in September 2023. He also highlighted that both inflation measures are within the target range of 4% ±1% of the monetary program.
He also specified that, with inflation under control, monetary policy became more expansionary, through a 100 basis point reduction in the monetary policy rate (MPR), from 8.50% in May 2023 to 7.50% currently. As a result, the rate for the permanent liquidity expansion facility (1-day repos) stands at 8.0% annually, while the rate for remunerated deposits (overnight deposits) is at 6.25% annually. He indicated that these decisions will contribute to lower financing costs for financial institutions and will lead to lower interest rates in the financial system.
In addition, he mentioned that the Monetary Board approved a monetary expansion program that included the liberalization of reserve requirements and the establishment of a rapid liquidity facility to channel resources through financial institutions to households and productive sectors. Regarding the latter, he specified that the liquidity measures have allowed for the channeling of approximately RD$126 billion to sectors such as commerce and MSMEs, consumer spending and housing, construction, manufacturing, and agriculture, among others, in most cases at interest rates no higher than 9.0%. He revealed that in October, the Monetary Board approved a new rapid liquidity facility of RD$40 billion to be allocated to the construction, manufacturing, export, and agricultural sectors, with approximately RD$13.735 billion having been disbursed as of October 19.
The governor stated that the Dominican Republic is not the only country in Latin America to reduce its Monetary Policy Rate (MPR), as a sign of normalizing its monetary policy. “So far this year, reductions have been observed in Costa Rica (250 basis points), Uruguay (200), Chile (175), Brazil (100), Paraguay (50), and Peru (50),” he added.
External Sector
: In the external sector, Central Bank Governor Héctor Valdez Albizu stated that free trade zones exported US$5,961.6 million during the first nine months of 2023, representing a 0.7% increase, after having remained in negative territory for much of the year. “Led by sales of medical and surgical equipment, exports from free trade zones demonstrated a strong capacity for recovery in the face of adverse global conditions,” he explained.
Valdez Albizu reaffirmed the remarkable evolution of tourism, registering revenues from this sector totaling US$7,594.4 million in January-September 2023. During that period, the country received remittances of US$7,597.1 million, which constitutes “a significant contribution to the economy of the Dominican diaspora,” he said.
On the other hand, the governor stated that foreign direct investment reached US$3,369.5 million in January-September, representing a year-on-year increase of 3.9%. “This flow of resources, mostly destined for energy, tourism, and commerce, demonstrates once again the great confidence of foreign investors in the country,” he emphasized.
The governor emphasized that “the large volume of foreign currency received by the Dominican economy during January-September has allowed for the relative stability of the exchange rate in an environment of international reserve accumulation.” In that regard, by the end of September, the Dominican peso had depreciated by only 0.8%, while international reserves stood at approximately US$15.9 billion, equivalent to 13.2% of GDP and 5.9 months of imports, exceeding the metrics recommended by the International Monetary Fund (IMF).
of the financial system,
emphasized the support the financial sector provides to private productive activity and the importance of its indicators demonstrating strength for the proper functioning of the economy. “According to the most recent information published by the Superintendency of Banks, the solvency position of the financial system reached 16.5% as of August 2023, comfortably exceeding the 10% required by current regulations. Likewise, the return on equity (ROE) was 26.3% and the return on assets (ROA) was 3.1%, while the non-performing loan ratio stood at just 1.1%, with the rate for commercial banks being even lower at 1.0%,” he highlighted.
Institutional Achievements
In his speech, the Governor of the Central Bank dedicated time to institutional achievements and the innovative topics the institution is particularly interested in developing and expanding. He highlighted the Central Bank's commitment to cybersecurity, emphasizing the Cybersecurity Incident Response Center, which has been recognized as one of the most modern in Latin America and has served as a pilot program for other central banks in cybersecurity matters. Furthermore, significant progress has been made on the National Financial Inclusion Strategy 2022-2030, with the completion of fieldwork for the National Survey on Financial Inclusion and Education (ENIEF 2023).
She reported that the Central Bank has agreed to develop, together with the financial system, a project to promote women's entrepreneurial initiatives and their relationship with financial matters, emphasizing female leadership in productive activity.
Valdez Albizu also mentioned that another issue in which the institution has been involved is climate change, maintaining an active role in the National Climate Change Council, conducting studies that it publishes in its magazine "Econoclima" and working on the design of measures that facilitate green financing and the management of environmental risks in the financial system.
On the other hand, Valdez Albizu acknowledged the growing global interest in central bank digital currencies (CBDCs). He stated that the Central Bank of the Dominican Republic (BCRD) is in a preliminary research phase regarding the macroeconomic implications of these currencies, with technical assistance from a team in the Monetary and Capital Markets Department of the International Monetary Fund (IMF), a process expected to take several years.
Finally, the governor reiterated his commitment to institutional social responsibility through various areas of influence. Specifically, he highlighted the diverse economic and financial training activities within the “Aula Central” program and all the initiatives developed within the “Voluntariado Bancentraliano” (Central Bank Volunteer Program).
Perspectives, Projections, and Reflections:
The governor stated that the outlook for the Dominican economy remains positive as long as monetary policy continues to have its intended effect and public investment is fully revitalized. This view is shared by multilateral organizations such as the IMF, which, in its most recent World Economic Outlook report, projects economic growth for the country of 3.0% in 2023 and 5.2% in 2024. He indicated that greater economic dynamism would be achieved within a context of stable prices, with inflation hovering around the midpoint of the target range of 4% ± 1%.
In other news, Valdez Albizu highlighted the positive performance of nominal GDP per capita, stating that “the evolution of growth in a stable environment in recent years has led to significant progress in the nation's GDP per capita. In this regard, from a level of US$8,583.1 in 2019, the pre-pandemic year, GDP per capita rose to US$10,732.9 in 2022 and is expected to exceed US$11,200 in 2023, placing it as the seventh Latin American country with the highest GDP per capita.”.
Regarding external sector indicators, he said that by the end of 2023, foreign direct investment is expected to exceed US$4.3 billion, and that tourism revenues will exceed US$10 billion, supported by an arrival of 10 million visitors by air and sea, and that remittances will close the year at around US$10 billion.
Finally, he emphasized his firm optimism about the country's future economy, based on the resilience of Dominicans and their great capacity to overcome critical moments and adapt to new realities. He highlighted that the Central Bank acts decisively in accordance with legal mandates, proactively adopting the necessary measures in response to macroeconomic developments to preserve stability for the benefit of the population.
