Dominican Republic Economic Forecast

GDP growth came in at 1.4% year on year in Q1 2023, more than halving from the prior quarter’s 3.3% expansion. Although economic activity growth accelerated to a three-month high of 2.1% year on year in March (February: +1.8% yoy), it could not offset a softer performance in the first two months of 2023. Meanwhile, in month-on-month terms, activity declined slightly on average in Q1 from Q4’s growth, revealing that underlying momentum was set back. Looking at the details of the GDP release, private spending should have supported the increase; price pressures softened in the quarter, while interest rates were left unchanged. Additionally, remittances expanded by over 3% year on year on average in Q1 (Q4 2022: +0.4% yoy), which should have supported consumers’ budgets. Tourist arrivals were also up by nearly 22% year on year in Q1, improving markedly from Q4’s 8.2% growth.

In April, inflation cooled to an over two-year low of 5.2% (March: 5.9%). Slower price increases for food, transport, and housing and utilities drove the moderation. Restrictive monetary policy and slowing domestic activity will pressure inflation downwards this year. Our panelists see inflation falling back within the 3.0–5.0% target band towards the end of the year.