SANTO DOMINGO.-The Central Bank of the Dominican Republic (BCRD) reported that the monthly indicator of economic activity (IMAE) registered an average year-on-year growth of 1.5% in the first two months of 2025.
The organization explains that this result reflects a moderation in the pace of economic expansion, associated with a slowdown in domestic demand, particularly investment, a component highly sensitive to the expectations of economic agents, which have been affected by the prevailing conditions of uncertainty in the international environment.
In this regard, it is worth noting that restrictive financial and liquidity conditions prevail externally, keeping interest rates in international markets relatively high. Additionally, volatility has increased in financial asset markets (bonds, stocks, commodities), the Central Bank highlights in its report on preliminary economic activity results for February 2025.
"It is also important to note, given its great relevance to the conduct of Dominican monetary policy, that during the last meeting of the US Federal Reserve's Open Market Committee, the Chairman of that entity emphasized that interest rate movements in the coming months would be conditioned by the evolution of the economy and inflation, given the announced modifications to the US's trade, fiscal, regulatory, and immigration policies, which could translate into lower economic growth and additional pressures on price behavior."
He adds that once this adverse context dissipates, the FED's decisions will be crucial, as they would provide the necessary space to contribute to the reactivation of domestic productive activities, without compromising price and overall macroeconomic stability, which is the main objective of the Central Bank of the Dominican Republic.
It notes that, as demonstrated on previous occasions, the Dominican economy has proven resilient and has been able to recover quickly from periods of slowdown. In this regard, the return of certainty and the stabilization of expectations, along with solid macroeconomic fundamentals and the dynamism of foreign direct investment, would contribute to boosting sustained economic growth.
The Central Bank points out that, in general, the external situation has adversely impacted the expectations of economic agents, leading to a pause in private sector investment, which, coupled with a decrease in the proportion of public capital spending, has been reflected in the performance of the construction sector.
While the performance of the services sector as a whole has remained positive, helping to mitigate the effect of the contraction in the construction sector, its growth rate, like that of local manufacturing and free trade zones, is below its long-term historical average.
Analyzing the results of different economic activities in January-February 2025 reveals positive expansion rates in agriculture (4.6%), local manufacturing (2.8%), and the services sector as a whole (2.6%). Within the services sector, financial services (8.4%), transportation and storage (3.9%), hotels, bars and restaurants (3.8%), and real estate and rental activities (3.3%) stand out.
In the case of construction activity, it accumulated a year-on-year change of -7.7% in January-February 2025. As explained, this sector has been impacted primarily by the external climate of uncertainty and by relatively high real interest rates, largely conditioned by monetary policy in the US, which remains restrictive and is expected to continue for a longer period than anticipated. This reality has been reflected in the readjustment of construction schedules for private sector projects, which are exhibiting a more gradual approach to investment. This has translated into lower demand for the main inputs used in construction compared to last year, which underpins the monitoring of this important activity in the current situation.
Regarding mining, activity experienced a year-on-year change of -6.5% in January-February of this year. This decline is essentially attributed to the slowdown in gold and silver extraction. It should also be noted that operations have been affected by conflicts between local communities where the country's main deposits are located and mining companies, generating tensions over the relocation of residents and environmental concerns.
Regarding tourism, there has been a moderation in the growth rate of non-resident foreign arrivals since mid-2024. This trend continued into the first months of 2025, largely due to the decrease in air traffic of non-resident foreigners from the United States and Canada. It should be noted that the Ministry of Tourism is proactively working to attract tourists from other countries to mitigate the impact of the North American region. In terms of value added for hotels, bars, and restaurants, this sector showed a year-on-year increase of 3.8% in January-February 2025, largely driven by the positive performance of food and beverage services, which offset the performance of the accommodation service component.
Financial intermediation activity experienced a notable year-on-year increase of 8.6% in February, for a cumulative increase of 8.4% in January-February 2025. This result was driven by a 12.7% expansion of credit granted to the private sector in both local and foreign currency, equivalent to an additional RD$262 billion compared to February 2024.
Finally, the agricultural sector showed year-on-year growth of 4.6% in January-February 2025, boosted by increased production of rice, plantains, bananas, avocados, eggs, chicken, and other crops. This positive performance has been supported by the technical and financial assistance provided to agricultural producers nationwide by the Government, through the Ministry of Agriculture and its agencies. These measures have contributed to agroforestry development and the country's food and nutritional security.
