Central Bank measures and growth in May stabilize the economy

The Central Bank’s 81 million peso injection into productive sectors to boost the Dominican economy, combined with the 3.1% economic growth during May, has provided reassurance and halted the speculation that fueled pessimism.

The 3.1% year-on-year economic growth announced by the BCRD eliminates speculation fueled by economists and paid spokespersons who have relied more on internal realities than on external factors such as the wars, suggesting that the institution was not well-focused. Opposition sectors would also like to capitalize on this unrest.

For years, as head of the Central Bank, Governor Héctor Valdez Albizu has maintained an optimistic outlook regarding the management and performance of the Dominican economy. However, recently, speculation has arisen due to a decline in the dollar’s premium against the peso. Despite this, the currency has demonstrated its strength in difficult external circumstances.

The figure released yesterday shows an increase greater than the 1.7% year-over-year increase recorded in April, driven mainly by the performance of mining, agriculture, local manufacturing, and construction.

“In this way,” the BCRD statement states, “the accumulated economic growth for the period January-May 2025 stands at 2.6% compared to the same period last year.”

It notes that restrictive financial and liquidity conditions prevail globally, reflected in relatively high interest rates in capital markets.

The document states that “restrictive financial and liquidity conditions prevail globally, reflected in interest rates that remain relatively high in the capital markets.”

It also points out that “high volatility in the prices of financial assets (bonds, stocks) and commodities, in an international environment characterized by growing uncertainty, has been exacerbated by the recent escalation of the conflict in the Middle East between Israel and Iran.”

The BCRD document quotes Kristalina Georgieva, director of the International Monetary Fund (IMF), as warning that “these geopolitical tensions would not only affect energy prices, but would also have implications for risk premiums and logistics costs.”

BC boosts the economy

Last week, the Central Bank’s Monetary Board announced the injection of 91 million pesos to boost the economy in its key sectors, including construction, manufacturing, exports, agriculture, and micro, small, and medium-sized enterprises, which have a broad impact.

These funds would be applied through the release of 50 billion pesos from the legal reserve, 17 billion pesos due in six months for final debtors, and another 14 billion pesos pending from facilities arranged in 2024. The funds should be granted at a rate no higher than 9% and for a term of up to two years.

The BCRD statement explaining the measure states that the Monetary Board “took into consideration the high levels of uncertainty and volatility in the international landscape associated with multiple geopolitical conflicts worldwide; as well as the liquidity levels of the financial system, the upward trend in interest rates nationwide, and the moderation of credit to the productive sectors.”

The Central Bank’s decision comes at the right time, in response to complaints from some sectors that “there is no money on the streets,” while others linked to businesses argue that interest rates are too high. The measure is designed to promote greater economic growth.

The injection of 81 billion pesos seeks to expand credit to the private sector and, more generally, to increase the dynamism of the Dominican economy “in a context of price stability and strong macroeconomic fundamentals.”