Economic outlook grows complex, but is still manageable
The situation following Russia’s invasion of Ukraine complicates the 2022 economic outlook for the Dominican economy. The rise in oil and raw materials prices, plus the fall in the flow of tourists from both Russia and Ukraine, will make it more difficult to achieve inflation and fiscal deficit goals, and complicates any progress in the reform of the electricity sector, and the total recovery of tourism. In January 2022, 10% of tourists to the Dominican Republic came from Ukraine and Russia.
Even before the outbreak of the conflict, inflation had risen to worrying levels, growing for three consecutive months, to 1.18% in January 2022. The 2022 monetary and financial program of the Central Bank was based on projections of oil prices WTI and coal of $68.4/b and $97.8/MT, respectively. With the oil and coal prices that are being observed after the beginning of the conflict in Ukraine ($119.60/b and $425.24/MT, respectively, as of March 7th), the possibility of reaching the inflation target of 4±1% in 2022 is diminished.
Aware of the social and political repercussions of out-of-control inflation, the government has reacted by launching measures to mitigate the impact of rising inflation on consumers, increasing targeted subsidies for lower-income population, general subsidies to the consumption of fuels and other sectoral subsidies.
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