The Ministry of Economy, Planning and Development estimates that inflation will close 2023 at 4%, equivalent to a downward revision of 0.50 p.p. with respect to the projection of the Macroeconomic Panorama of March of this year.
The information is contained in the Macroeconomic Outlook 2023-2027 corresponding to the inter-institutional review of this June, published by the Vice-Ministry of Economic and Social Analysis, through the Directorate of Macroeconomic Analysis.
It also points out that, at the price level, in May inter-annual inflation returned to its target range and stood at 4.43%, the lowest percentage since July 2020.
He adds that the slowdown in the increase of prices in May responds to the effectiveness of the monetary policy transmission mechanisms implemented by the Central Bank of the Dominican Republic, together with the measures adopted by the Dominican State, such as fuel subsidies and the temporary halt of the increase in electricity rates.
It also indicates that commodity prices in the international market have remained stable since the end of 2022 and container costs are converging to their pre-pandemic levels, which has also contributed to the reduction of the local price level.
It adds that core inflation, which excludes the most volatile components of the family basket, showed a deceleration in its growth rate and stood at 5.51% in May, a reduction of 0.32 p.p. with respect to the previous month and the lowest since February 2021 (5.36%).
Behavior of the Dominican economy
The publication points out that, considering the moderation of external demand and the behavior of the Dominican economy in the first months of the year, an expansion of 4.0% is forecast for 2023, equivalent to a downward revision of 0.25 p.p. with respect to the March 2023 Macroeconomic Outlook forecast.
Regarding the real sector, it maintains that, during the first four months of 2023, the Dominican economy experienced a deceleration in its growth rate.
It specifies that the monthly indicator of economic activity (IMAE) registered an accumulated expansion of 1.2% in the period January-April 2023, as a result of a slower domestic demand, in line with higher interest rates, increases in the prices of the main inputs in important sectors of the economy, and a moderation of world growth.
The Macroeconomic Outlook points out that the performance of the economy in the first four months of the year has been driven by the services sector, mainly by the activity of hotels, bars and restaurants.
“This was explained by the arrival of 2.8 million non-resident visitors to the country during the first four months of the year, equivalent to a year-on-year growth of 21.7%. Additionally, the growth of the agricultural sector, specifically agricultural activity, stands out,” he points out.
However, it adds that the slowdown observed in sectors that have led growth in recent years, such as construction, manufacturing and commerce, pushed down the result of the real Gross Domestic Product (GDP) in this period.
The Macroeconomic Outlook is an effort by the teams of the Ministry of Economy, the Ministry of Finance and the Central Bank of the Dominican Republic, to provide decision makers with updated projections for medium-term economic planning.
“These forecasts are subject to the levels of uncertainty observed in the global market, for which reason this team reiterates its commitment to continue monitoring the international environment and its potential impact on the Dominican economy,” the Macroeconomic Panorama states.