The Dominican economy has grown less than that of six other Central American countries
Santo Domingo.- In 2023, the Dominican Republic finds itself at the bottom of the economic growth ladder among the seven member countries of the Central American Monetary Council and Panama. This marks a stark contrast from the previous year when it occupied one of the top three positions.
According to data published in the monthly report by the Central American Monetary Council, Panama takes the lead in economic growth with an impressive cumulative rate of 9% as of May. Following closely behind are Costa Rica, Guatemala, Nicaragua, and El Salvador. Unfortunately, the Dominican Republic lags behind with a growth rate of just 1.5% up to July.
Economist Odalis Marte, the executive secretary of the Central American Monetary Council, expressed optimism about the Dominican economy, even in the face of international uncertainties. He emphasized that despite the recent slowdown, the Dominican Republic is still considered a high-growth economy.
Marte explained that the economic performance in 2023 can be attributed to several factors. Firstly, there is a statistical effect resulting from the normalization of economic expansion rates following a robust post-pandemic recovery. The economy surged by 11.1% in 2021 but gradually stabilized to 4.9% in 2022, a level consistent with the country’s potential growth. Such normalization is expected as long as there are no significant disruptions to the growth trajectory.
Secondly, monetary measures were necessary to curb inflationary pressures, impacting the growth rate. Thirdly, there was a reduction in public spending on economic activity after a substantial increase in expenditure during the COVID-19 pandemic to address public health requirements.
A crucial fourth factor contributing to the slowdown is the deceleration of the United States economy, the Dominican Republic’s primary trading partner. This has had adverse effects on trade and financial transfers between the two nations.
José Manuel Salazar, executive secretary of the Economic Commission for Latin America and the Caribbean (Cepal), echoed the impact of the U.S. slowdown, particularly on Dominican exports. He noted that private consumption also slowed due to rising interest rates.
Data from Customs reports a decline in total exports from the Dominican Republic between January and June 2023, amounting to $6,228.72 million—a 1.33% decrease compared to the same period in 2022. Within this period, the national regime’s exports experienced a sharp drop of 9.03%, with exports to the United States declining by 5.59% in the first half of the year.
Looking ahead, Marte highlighted that the measures implemented to stimulate the Dominican economy are starting to yield positive results. In July, the Monthly Indicator of Economic Activity (IMAE) showed a year-on-year growth of 2.9%.
However, both ECLAC and the Dominican Government have revised their growth projections downward for the local economy in 2023, forecasting 3.7% and 3%, respectively. Marte believes that these adjustments reflect the performance in the initial months of the year and anticipates that growth will approach the economy’s potential in the coming months. He recommends continued efforts to stimulate economic activity.