British economist Michael Perks was introduced to the Central Bank governor as the new mission chief for the Dominican Republic, and the governor greeted him with a clear message: an international environment that Héctor Valdez Albizu described as "turbulent," with more expensive oil keeping inflation above target, and a peso that has appreciated by nearly 7.0%
SANTO DOMINGO– Central Bank Governor Héctor Valdez Albizu attributed the Dominican economy's strong performance in 2026 to exports, tourism, remittances, and foreign direct investment, without the press release from his September 29 meeting with the IMF making any mention of construction.
But the Central Bank's own monthly economic activity indicator, with data from August, places it as the first sector in expansion, with 7.9% year-on-year, and the ONE reports that the direct cost of building homes in the National District and Santo Domingo rose 4.22% in August compared to July, driven by labor.
Just over four months ago, Michael Perks described a proposed 36-month, $260 million standby agreement with Barbados as "insurance against external shocks.".
This Tuesday, the British economist, who had been leading the IMF mission on that island, was introduced to Héctor Valdez Albizu, governor of the Central Bank, as the new head of mission for the Dominican Republic, who spoke to him about the "turbulent" international environment, the more expensive oil, inflation above the target and a peso with an appreciation close to 7.0%.
Inflation and economic growth in the Central Bank's projections
According to the governor's figures, year-on-year inflation fell from 5.67% in June to 5.13% in August, still above the 4.0% ± 1.0% target range, with convergence expected in the last quarter and core inflation within the target. He projected growth of around 4.5% by 2026, higher than the 3.5% to 4.0% he had anticipated in April during the spring meetings with the IMF.
That 4.5% coincides with the average from January to August that the Central Bank reported in its monthly indicator of economic activity, published on September 29 by El Inmobiliario.
In the Central Bank's press release about the meeting, the governor attributes the economy's strong performance in 2026 to the resilience of exports, tourism, remittances, and foreign direct investment, and construction is not included in that list.
Construction leads sectoral expansion in August
However, the Central Bank's most recent activity indicator places it first on the list of sectors driving the expansion, with a year-on-year increase of 7.9% in August (financial services grew 9.4% within the services sector), attributed to private residential and non-residential investment and civil works linked to government capital expenditures. Credit to construction grew 16.2% year-on-year at the end of August, an increase of more than RD$26 billion compared to the previous year.
The cost of building homes rose 4.22% in August
The cost of constructing these buildings tells a different story, although it is measured by a different standard. The National Statistics Office's Direct Housing Construction Cost Index only covers housing in the National District and Santo Domingo province and excludes land, design, permits, and financing costs, while the Central Bank's indicator measures activity throughout the country, including civil works.
With that exception, the index stood at 250.81 points in August, with a monthly increase of 4.22%, a year-on-year increase of 6.42% and an accumulated variation of 6.19% since December, and single-family homes of one level rose 5.14% in the month.
Labor costs drove the increase in expenses
The driving force behind the increase was labor, with a 12% rise in carpentry, electrical work, masonry, excavation, plumbing, and day labor. This jump is linked to a wage increase that took effect in August, and labor accounts for approximately 30% of total costs.
Materials rose 0.61% and tools 0.39%, while machinery fell 0.11% and subcontracts 0.02%.
The data only partially answers how much of the external pressure reaches the construction site: between May and July, the ONE's Direct Cost Index for Housing Construction remained almost stable, at 240.61, 240.31 and 240.62 points, with general inflation at 5.67% in June, so that in those months the direct cost of building did not show a jump and yet, when August arrived, it came with a wage component.
One month is not enough to know how much the exchange rate compensates for the price of fuels in imported materials, and the 0.61% in August for materials does not allow us to conclude it.
The Perks experience and the monitoring of indicators
The Central Bank's note describes Perks as a senior economist specializing in macroeconomics and program supervision, with experience in macroeconomic and fiscal stability, climate resilience and sustainability policies, and structural reforms.
In the case of Barbados, according to press reports, the proposed agreement would support fiscal discipline while maintaining investment in infrastructure, climate resilience, and social protection.
The September ICVD, which the ONE is expected to publish at the end of October if it maintains its schedule, will show whether the August jump has become the new cost level. Inflation for that month will indicate whether the convergence toward the target range, projected for the last quarter, is on track.
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