IMF Executive Board Concludes 2023 Article IV Consultation with the Dominican Republic
IMF News, June 22, 2023
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- Published: June 22, 2023
Overview and recent performance
- The Dominican Republic’s economy has been described as "one of the most dynamic and resilient in the Western Hemisphere over the last two decades."
- Recovery from the pandemic was "impressive," supported by "the authorities’ sound policies as well as positive global spillovers."
- Economic activity expanded by 4.9 percent in 2022, led by services and manufacturing; construction eased due to higher costs and tighter financial conditions; mining declined due to temporary capacity constraints.
- Headline inflation fell from its April 2022 peak of 9.6 percent to 4.4 percent in May 2023.
- The current account deficit widened to 5.6 percent of GDP in 2022 due to softening goods exports, higher commodity prices, and continued domestic demand recovery; it was mostly financed by FDI flows.
- Despite tighter global and domestic financial conditions, "the financial sector appears adequately capitalized, liquid, and profitable."
Outlook and risks
- Real GDP growth is projected to decelerate slightly to around 4 percent in 2023 due to lagged effects of financial tightening and lower global demand.
- Growth is expected to return to its trend of around 5 percent in 2024 as global financial conditions ease somewhat and the world economy recovers.
- The external position is sustainable; the current account deficit is projected to narrow over the medium term to 3.1 percent of GDP, driven by lower commodity prices and steady improvements in exports and tourist receipts.
- Short-run risks are dominated by downside risks, "including from a further tightening of global financial conditions and sharper slowdown in global growth"; medium-run risks are "more broadly balanced."
Executive Board assessment and key messages
- Directors highlighted "remarkable economic growth over the past two decades" and significant poverty reduction.
- They welcomed "the authorities’ strong macroeconomic policies and sound policy framework" and agreed the outlook "remains positive, although downside risks dominate in the near term."
- Near-term policy priority: maintain macroeconomic and financial stability while continuing structural reforms to boost inclusive growth and resilience.
Monetary and exchange rate guidance
- Directors welcomed the monetary policy response that helped ease inflationary pressures and stressed it should continue to be calibrated to ensure inflation remains within the target range and inflation expectations stay anchored.
- Emphasized the importance of strengthening central bank autonomy through its recapitalization and legislative reforms.
- Recommended greater exchange rate flexibility and deepening of the foreign exchange market to enhance monetary transmission and help confront adverse shocks.
Fiscal policy and public financial management
- Directors commended efforts to bring a sound fiscal responsibility law to fruition and called for further public financial management improvements to enhance efficiency and transparency.
- Agreed fiscal policy should remain focused on placing debt on a firmly downward path.
- Recommended fiscal consolidation be supported by:
- tax reforms,
- further tax administration improvements,
- expenditure rationalization—notably through implementing the Electricity Pact.
- Objective: rebuild fiscal buffers and create space for social and infrastructure spending.
Financial sector and regulatory reforms
- Directors noted the financial sector remains resilient but called for continued close monitoring given tighter financial conditions.
- To strengthen financial stability, recommended:
- modernizing the regulatory framework by implementing best international standards for supervision and regulation,
- expanding the macroprudential toolkit,
- further strengthening the AML/CFT framework,
- introducing a prudential regulatory framework for unregulated financial institutions.
Structural reforms and climate-related recommendations
- Directors commended the authorities’ ambitious structural reform agenda focused on public institutions, governance, education, and the business environment.
- Encouraged perseverance with electricity sector reforms to improve governance and efficiency.
- Called for implementation of climate adaptation and mitigation policies to reduce economic and financial vulnerabilities.
- Noted authorities’ interest in technical assistance, including a Public Investment Management Assessment and its climate module (C‑PIMA), and interest in the Resilience and Sustainability Facility in the future.
Key statistics and projections (selected exact figures)
- Population (millions, 2022): 10.6
- GDP per capita (2022, U.S. dollars): 10,710.1
- Quota: 477.4 million SDRs / 0.10% of total
- Poverty (2021, share of population): 23.2
- Main exports: tourism, gold, tobacco
- Unemployment rate (2022, percent): 5.3
- Key export markets: U.S., Canada, Haiti
- Adult literacy rate (percent, 2021): 95.2
- Real GDP (annual percentage change):
- 2019: 5.1
- 2020: -6.7
- 2021: 12.3
- 2022: 4.9
- 2023 (projection): 4.0
- 2024 (projection): 5.0
- Contributions to growth (selected):
- Consumption 2019–2023: 3.7; -1.9; 4.5; 4.1; 3.8
- Investment 2019–2024: 1.1; -4.4; 8.0; 2.4; 0.9; 2.0
- Net exports 2019–2024: -1.4; -3.2; -0.1; -1.5; -0.9; 0.1
- Nominal GDP (RD$ billion): 2019: 4,562; 2020: 4,457; 2021: 5,393; 2022: 6,261; 2023: 6,821; 2024: 7,433
- Nominal GDP (US$ billion): 2019: 89.0; 2020: 78.9; 2021: 94.5; 2022: 113.9; 2023: ...
- Output gap (percent of potential output) 2019–2024: -0.6; -6.3; -0.3; -0.4; -0.2
- Consumer price inflation (end of period): 2019: 5.6; 2020: 8.5; 2021: 7.8; 2022: (value provided in text: April 2022 peak 9.6 percent; May 2023: 4.4 percent)
- Exchange rate (RD$/US$ - period average) 1/: 2019: 51.2; 2020: 56.5; 2021: 57.1; 2022: 55.0
- Exchange rate (RD$/US$ - eop) 1/: 2019: 52.9; 2020: 58.2; 2021: 57.3; 2022: 56.2
- Real effective exchange rate (eop, - depreciation) 1/: 2019: -8.1; 2020: 6.5; 2021: 6.3; 2022: 0.0
- Consolidated public sector debt (percent of GDP) 2019–2024: 53.3; 71.1; 62.2; 58.8; 56.0
- Consolidated public sector overall balance (percent of GDP) 2019–2023: -3.3; -9.0; -3.7; -3.6; -3.9
- Consolidated public sector primary balance 2019–2024: 0.5; -4.3; 0.6; 0.2; 0.7
- NFPS balance 2019–2024: -2.3; -7.6; -2.5; -2.7; -2.9; -2.8
- Revenues and grants 2019–2024: 14.4; 14.2; 15.6; 15.3; 14.8; 14.9
- Primary spending 2019–2024: 15.1; 18.9; 15.4; 15.7; 14.7; 14.5
- Interest expenditure 2019–2022: 2.7; 3.2; 3.1; 2.8
- Broad money (M3) annual % change 2019–2024: 11.7; 20.8; 13.3; 6.6; 8.3; 9.3
- Credit to the private sector 2019–2024: 11.8; 11.6; 16.6; 10.0; 12.2
- Net domestic assets of the banking system 2019–2024: 8.6; 2.5; 11.5; 9.7; 7.9
- Policy interest rate (in percent) 1/: 2019: 3.0; 2020: 3.5; 2021: …
- Average bank deposit rate (1-year; in percent) 1/: 2019: 6.7; 2020: 2.3; 2021: 9.9
- Average bank lending rate (1-year; in percent) 1/: 2019: 12.4; 2020: 9.2; 2021: 13.5
- Current account (percent of GDP) 2019–2022: -1.3; -1.7; -5.6
- Goods, net 2019–2024: -10.2; -8.6; -12.5; -14.9; -14.0; -13.4
- Services, net 2019–2024: 5.7; 1.8; 3.9; 5.0; 5.8; 6.0
- Change in reserves (-increase) 2019–2021: -2.4; -0.8; -0.7
- GIR (in millions of US dollars): 8,782; 10,752; 12,943; 14,383; 15,403; 16,343
- Total external debt (in percent of GDP) 2019–2024: 41.9; 56.3; 48.6; 40.5; 39.6; 38.7
- Consolidated public sector share of external debt 2019–2024: 27.3; 40.3; 35.6; 33.2; 31.7; 31.4
IMF Executive Board Concludes 2023 Article IV Consultation with the Dominican Republic, Press Release No. 23/233, June 22, 2023.