Low growth persists; monetary policy responds

DOMINICAN REPUBLIC - Forecast 17 Jul 2025 by Pavel Isa and Magdalena Lizardo

The most recent data confirms that low growth is consolidating for 2025. The Monthly Indicator of Economic Activity (IMAE) for May showed y/y growth of 3.1%, and cumulative growth for January–May stood at 2.6%. Lower rates can be observed across most sectors, and are particularly noticeable in construction. The trend has led the Dominican government to slash its 2025 growth forecast. While in March the estimated growth rate was 4.5%, by June it had been cut to 3.5%. Low growth is generally explained by weak domestic demand, which—as pointed out in previous reports—has been affected by the high cost of financing, and liquidity constraints. Labor market indicators nonetheless remain positive.

Monetary policy remained moderately restrictive in Q2 2025, maintaining the brake on the expansionary momentum that began in mid-2023. As a result, the y/y growth of monetary aggregates continued to decline, in contrast with a year ago. The slowdown in expansionary momentum was reflected in a sharp deceleration of credit to the private sector. In line with the conduct of monetary policy and credit dynamics, interest rates in June remained high and stable.

But in mid-June, in response to liquidity constraints and the marked deceleration of private sector credit, the Monetary Board approved a liquidity provision program aimed at fostering more favorable conditions for investment and growth. Results have yet to materialize.

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