Economic landscape in 2024 should be more manageable, yet not without risks
The Dominican Republic experienced both commendable and less favorable outcomes in 2023. The inflation target was achieved in 2023 with a rate of 3.57%, less than half the rate of 2022. But GDP growth is estimated to have ended the year at around 2.3%, possibly the fourth-lowest growth rate since 1992, surpassed only by the contractions of 2003 (-1.3%) and 2020 (-6.7%), and the 2009 recession (0.9%). The poverty rate, affecting 27.7% of the population in 2023, decreased by 3 ppts from 2022, although it still exceeds the level of 2019 (25.8%). Both monetary policy and subsidy strategies have been crucial to achieving these results.
The current account deficit for 2023 is estimated at -4% of GDP, lower than the -5.5% of 2022, resulting from increased income from tourism and remittances, and a fall in imports. Foreign direct investment closed at its highest level since 2010, at $4.3 billion. After appreciating in H1 2023, the currency depreciated in H2, accumulating an annual depreciation of 1.7%. The Central Bank closed the year with high net international reserves, of $15.5 billion. Preliminary results indicate a 2023 fiscal deficit of 3.1% of GDP, below the 2022 figure of -3.5% of GDP, thanks to increased revenues from tax prepayments. An increase in SPNF debt of $3.3 billion is estimated, bringing the accumulated amount to $55.1 billion, close to 45.9% of GDP.
For 2024, faster economic growth is expected, converging towards its potential growth rate (5%). Inflation should remain within target range. The CAD is on track to increase slightly, to -4.3% of GDP), and the nominal exchange rate to depreciate by 3.2%-4% from 2023. We expect the SPNF deficit to remain between 3.1% and 3.5% of GDP. There are risks of worsening macroeconomic conditions, due to international uncertainty, international geopolitical tensions and the recessive effects of a potential fiscal reform.
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