The Dominican Republic Central Bank predicts a 6% economic growth in 2021, higher than its potential rate and in a context of price stability and strong macroeconomic fundamentals.
The financial institution released a document with the challenges and perspectives of the Dominican economy for 2021, highlighting that its growth depends on the coordinated action of monetary and fiscal policy and its continuous support for domestic demand, together with the progressive re-establishment of economic activity in productive sectors and the eventual implementation in the country of the vaccination program against COVID-19.
The report keeps a positive outcome despite the adverse environment that the Dominican economy faced during 2020 and outlooks a renewed optimism, supported by its strong macroeconomic fundamentals. Also, the undeniable capacity for resilience of the markets that are verified in the successful placements made of global bonds by the Ministry of Finance at historically low rates and more favorable terms.
Another explanation given by the Central Bank to justify economic growth in 2021 is the December operation to manage external liabilities that are expected to reduce debt service by more than US $ 1.1 billion in the next four years. These placements reflect the confidence of foreign investors in the policies implemented by the new administration of President Luis Abinader and the resilience of the Dominican economy, the bank’s report indicates.
The 6% growth that is expected will also be, according to the Central Bank, because of the favorable external financial conditions, together with the expansionary measures adopted and the best forecasts in the international environment given the development of new vaccines against COVID- 19. “The Dominican Republic would be the Latin American country that would recover its level of per capita income the fastest prior to the pandemic, as the International Monetary Fund (IMF) has stated,” the entity points out.
Economic measures in 2020
The 2020 provisions to keep the economy dynamic will allow the country to begin to recover in 2021, among which are that financial institutions have disbursed more than 165,000 million pesos, though some 68,000 loans to companies and homes through financial intermediation entities.
In addition, preliminary information from the Central Bank indicates that at the end of 2020 the delinquency ratio of financial intermediation entities remains low at 1.94%, while the Return on Equity (ROE) indicator stood at 15.3% and Profitability on assets (ROA) at 1.74%.
It also highlights the launch by the government of Luis Abinader of some support programs for the productive sectors, such as tourism, agriculture, industry, and exports, as well as the start of important infrastructure projects and other strategic projects that will be carried out through Public-Private Partnerships, factors that will contribute to maintaining the path of recovery of economic activity in the course of the coming quarters.
World Bank Forecast
As for Latin America, it is foreseen that the region is set to grow 3.7%, influenced by more favorable terms of trade, by the normalization of its international trade, and by a gradual improvement in tourist activity.
According to the World Bank, the Latin American countries that would register the highest growth in 2021 would be Peru (7.6%), Panama (5.1%), Colombia (4.9%), Argentina (4.9%), and the Dominican Republic (4.8%).