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Dominican Republic: Economic Update

Based on the latest data from the International Monetary Fund (IMF), here are the key findings related to the Dominican Republic’s economy.

Inflation

• The headline inflation rate declined to 1.2 percent at end-December 2018, well below the target band.
• Core inflation remained stable at around 2.5 percent in 2018 and eased slightly in the first quarter of 2019.

External Position

• The external position weakened somewhat in 2018 but remains solid.
• The current account deficit widened to 1.4 percent of GDP in 2018, still stronger than the historical average.
• High remittances (around 1 percent of GDP above the historical average) and a demand-related increase in imports drove the widening of the current account deficit.

Remittances

• Remittances receipts increased by 10-15 percent year-over-year (yoy).
• The growth rate of remittances is linked to increasing U.S. employment and wages, as well as uncertainty surrounding U.S. immigration policy.

Financial Sector

• The financial sector remains sound, with macro-financial vulnerabilities appearing limited.
• Private credit stabilized at around 27 percent of GDP in 2018, remaining low by historical and international standards.

GDP Growth

• Staff estimates suggest that the downside pressures from second-round effects of positive supply shocks have more than offset upside pressures from demand and policy factors during 2018.

Conclusion

Overall, the IMF concludes that the Dominican Republic’s external position is broadly consistent with medium-term fundamentals and desirable policy settings in 2018.