IMF recommends that the Dominican Republic focus in the short term on maintaining stability
photo from newspaper eldinero
Santo Domingo.- The International Monetary Fund (IMF) has advised the Dominican Republic to prioritize maintaining macroeconomic and financial stability while advancing structural reforms to foster inclusive and resilient growth in the short term.
After a visit to the country by an IMF delegation to gather information and assess economic policies, the agency issued a statement on Thursday stating that the economic outlook for the Dominican Republic remains positive, although short-term risks are dominant.
While the Dominican economy has been one of the most dynamic in the Americas over the past two decades and experienced a positive recovery after the pandemic, the strong rebound has started to moderate in 2022. Uncertainty suggests that the real Gross Domestic Product (GDP) growth will slow down to 4% this year.
In 2022, economic activity increased by 4.9%, driven by the services and manufacturing sectors. However, following the slowdown this year, greater growth is expected in 2024.
The IMF executive board commended the monetary policy response of the Dominican Republic, which has contributed to reducing inflationary pressures. It advised the authorities to continue adapting monetary policy to maintain control over inflation. Inflation decreased from 9.6% in April 2022 to 4.4% in May.
The agency also emphasized the importance of strengthening the autonomy of the central bank through recapitalization and legislative reforms.
Furthermore, the IMF suggested that greater exchange rate flexibility and a deepening of the exchange market would enhance the monetary transmission mechanism and help the economy navigate potential adversities.
Regarding fiscal matters, the IMF delegation commended the authorities for implementing a solid fiscal responsibility law. They emphasized the need to continue focusing on reducing public debt through fiscal consolidation. The IMF recommended that fiscal consolidation be supported by tax reforms, improved tax administration, and expenditure rationalization.
In terms of the financial system, the IMF stressed the importance of ongoing modernization of the regulatory framework, aligning it with international standards for supervision and regulation. They also urged the Dominican Republic to continue strengthening the framework against money laundering and terrorist financing.