Economic slowdown persists in 2025, but moderate expansion expected in 2026
The Dominican economy again showed signs of weakening, growing just 1.5% y/y in August. Headline inflation remained at the lower end of the target range (at 3.76%), with core inflation at the upper end (at 4.35%). The DOP experienced high volatility in September, and y/y depreciation of 4.85%, while international reserves declined for the third consecutive month, to $13.3 billion.
The average lending rate fell by 46 bp following liquidity measures adopted in June, although credit to the private sector has yet to respond.
The external sector remains strong, with merchandise exports rising by 10.2% between January and September, driven by gold, as well as by the continued positive performance of remittances.
Tax revenues in September were growing more slowly than expenditures, although the deficit remains within expectations. The 2026 budget projects a deficit of 3.2% of GDP and financing needs of $6.1 billion, to be partly addressed with a $2.5 billion global bond issuance.
Positive moderate growth is projected for 2025, though below the official projection of 3%, with inflation remaining within the target range, and a current account deficit of -2.2% of GDP. Growth is expected to accelerate in 2026, although the official projection of 4.5% remains the below potential figure of 5%. Inflation should stay within the target range; the external deficit is on track to narrow to -1.5% of GDP; and currency depreciation will hover around 3%, with an exchange rate of DOP 63.62 per dollar. These projections assume favorable oil and gold prices; otherwise, external and fiscal imbalances could widen.
Now read on...
Register to sample a report