The Governor of the Central Bank of the Dominican Republic (BCRD), Héctor Valdez Albizu, received in person the mission chief of the International Monetary Fund (IMF), Esteban Vesperoni, who was accompanied virtually by members of his team, who will jointly evaluate the recent performance of the Dominican economy, its macroeconomic projections and the implementation of policies.
Valdez Albizu gave a general overview of the state of the Dominican Republic’s economy with the most relevant data on growth, monetary policy, inflation and the behavior of the external sector.
With respect to growth, the governor stated that the Dominican Republic continues its sustained recovery process, highlighting the monthly indicator of economic activity (IMAE) for January-September of 12.7%, influenced by the good performance of sectors with high productive linkages such as construction, local manufacturing, free zones and trade. “Growth projections for 2021 point to an expansion above 10 %, which could be around 10.7 %”, he estimated.
These positive prospects are supported by the gradual improvement in tourism, as some five million non-resident visitors are expected for the whole of 2021, as well as the progress in the national vaccination plan, which has managed to inoculate around 77 % of the adult population with one dose and more than 63 % with two doses.
The governor also highlighted the execution since March 2020 of the broad monetary easing plan worth RD$215 billion, approximately 5% of the gross domestic product (GDP), accompanied by a reduction of 150 basis points in the monetary policy rate.
This monetary policy measure contributed to maintaining high levels of liquidity in the financial system, allowing for an expansion of private credit in local currency of around 10%. As the economy consolidates its recovery, the Central Bank of the Dominican Republic began in August of this year the gradual and orderly return of the liquidity provided to financial intermediaries during the pandemic, in support of the productive sectors.
Valdez Albizu pointed out that the inflationary dynamics have been affected by transitory supply shocks associated with higher prices of oil and other raw materials, as well as the absence of containers and the increase in global freight costs, which have affected imports. He noted that the BCRD’s forecasting system indicates that inflation would gradually converge to the target range of 4% ± 1% by mid-2022.
Regarding the external sector, the governor affirmed that remittances will exceed US$10 billion by the end of 2021 and that foreign direct investment (FDI) flows continue to be high, estimating that they will be around US$3 billion by the end of the year.
Likewise, the levels of international reserves remain at historically high levels, estimating that they will close 2021 close to US$12.5 billion, equivalent to 7.2 months of imports and 13.7% of the GDP, which exceeds the metrics recommended by the IMF.
Valdez Albizu pointed out that, in the Dominican case, the distribution of the US$650 million from the allocation of the Special Drawing Rights (SDR) by the IMF was used to strengthen the Central Bank’s international reserves.
The Governor highlighted the great work carried out by the President of the Republic, Luis Abinader, to promote the different sectors of the economy and achieve its resilience, as well as the transcendental role played in this regard by the country’s private sector.
The IMF mission chief, who participated in person in the meeting together with Frank Fuentes, Dominican representative to the IMF, was accompanied virtually by Pamela Madrid, Hassan Adan, Ben Sutton, Nicolás Fernandez-Arias, Dirk Jan Grolleman, Mario Mansilla and Evelyn Carbajal.
Present with the Governor were the Vice Governor, Clarissa de la Rocha de Torres; the Manager, Ervin Novas Bello; the Deputy General Manager, Frank Montaño; the Deputy Manager of Monetary, Exchange and Financial Policies, Joel Tejeda; the Deputy Manager of National Accounts and Economic Statistics, Ramón González; and the Economic Advisor of the Governor’s Office, Julio Andújar Sckeker.
Also present were the director of the Monetary Programming and Economic Studies Department, Joel González; the director of the Financial Regulation and Stability Department, Máximo Rodríguez; the director of the International Department, Brenda Villanueva; and the director of the Treasury Department, Yamileh García Belén.