This is the highest monthly growth rate of 2023, surpassing the 2.6% of the third quarter and the 3.1% of the previous month. The economy is expected to reach its potential growth rate in 2024, according to the Central Bank's forecasting system.
SANTO DOMINGO.- The Central Bank of the Dominican Republic (BCRD) reported this Friday that the monthly economic activity indicator (IMAE) registered a year-on-year expansion of 3.6% in October 2023, the highest monthly rate of the year, after having registered year-on-year growth of 2.6% in the third quarter of 2023. This indicates that the monetary policy transmission mechanism is operating favorably and that the Dominican economy continues its recovery process, such that it is expected to reach its potential growth rate in 2024 according to the Central Bank's forecasting system.
According to the preliminary results of the Dominican economy as of October 2023, the year-on-year growth for the month of 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%), commerce (2.8%), local manufacturing (1.5%), among others.
An important point highlighted by the Central Bank is that the construction sector, with a significant multiplier effect and a ripple effect 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 using securities as collateral to accelerate the transmission of monetary policy, as well as the faster pace of public capital expenditure compared to the same period last year and the stabilization of input prices used in this activity.
It is worth noting that during the current year, these measures have resulted in loan disbursements of approximately RD$158 billion at rates no higher than 9.0% annually. These disbursements, combined with a 125-basis-point reduction in the monetary policy rate, have led to a reduction in the weighted average interest rates of loans by approximately 200 basis points, signifying a more than complete transfer of the monetary policy signal to market rates.
Analyzing the Monthly Index of Economic Activity (IMAE) in cumulative terms, it is observed that it registered an average variation of 1.9% during January-October 2023 compared to the same period in 2022. Hotels, bars, and restaurants, with an expansion of 10.8%, were the sector that contributed most to this year's growth, accounting for approximately 40.0% of it, the agency revealed in a press release.
It noted that the growth in the real value added of the Hotels, Bars, and Restaurants sector is primarily due to the arrival of tourists by air, which reached 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 ship passengers by sea in October, the cumulative total of visitors to the country in the first ten months of the year reached 8.3 million, a historical record according to figures reported by the Ministry of Tourism. The total number of visitors, including air and cruise ship passengers, is projected to exceed 10 million by the end of 2023, representing over US$10 billion in foreign exchange earnings for the country.
Regarding financial intermediation, it showed a year-on-year increase of 6.6% in its real value added during the first half of 2023. This growth was driven by a 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 billion in loans disbursed.
Analyzing agricultural activity, the Central Bank of the Dominican Republic (BCRD) observed a year-on-year growth of 3.9% during the first half of 2023. "The sector's performance is due to increased production of key domestic consumption items such as plantains, chicken, and eggs, among others." The measures implemented by the Government, through the Ministry of Agriculture and its agencies, have been fundamental to this performance. These measures have provided technical and financial support to agricultural producers nationwide and guaranteed the country's food security.
Finally, the agency states that the strength of the macroeconomic fundamentals and the resilience of the Dominican economy's productive sectors allow it to continue advancing on the path of economic recovery, in a context where inflation is expected to remain within the target range of 4.0% ± 1.0% over the monetary policy horizon.
