Dominican Republic Government Consumption (ann. var. %)

Government Consumption in Dominican Republic

Economy plunges in Q2 overall, although contraction eases in May and June

Economy plunges in Q2 overall, although contraction eases in May and June

The economy contracted 16.8% in the second quarter according to monthly economic activity (IMAE) data as domestic lockdown measures and the border closure crushed activity (Q1: +0.2% year-on-year). While a breakdown by sector has yet to be made available, Q2’s reading was likely driven by steep falls in the hotels, bars and restaurants; construction; and mining sectors. More positively, economic activity started to recover in May and June, after reaching a low point in April, as containment measures were lifted.

The economy contracted 16.8% in the second quarter according to monthly economic activity (IMAE) data as domestic lockdown measures and the border closure crushed activity (Q1: +0.2% year-on-year). While a breakdown by sector has yet to be made available, Q2’s reading was likely driven by steep falls in the hotels, bars and restaurants; construction; and mining sectors. More positively, economic activity started to recover in May and June, after reaching a low point in April, as containment measures were lifted.

Turning to the second half of the year, despite the reopening of international borders from 1 July, the rebound in the economy could stall after the government reimposed the state of emergency until 10 August due to surging new Covid-19 cases. Health concerns will also temper tourist arrivals.

Regarding the medium-term outlook, Carlos de Sousa, economist at Oxford Economics, comments: “We expect a sharp rebound in 2021, supported by expansionary fiscal and monetary policies, but the economy will remain below its pre-crisis trend as the tourism sector is unlikely to recover its 2019 level until 2023.”

Turning to the second half of the year, despite the reopening of international borders from 1 July, the rebound in the economy could stall after the government reimposed the state of emergency until 10 August due to surging new Covid-19 cases. Health concerns will also temper tourist arrivals.

Regarding the medium-term outlook, Carlos de Sousa, economist at Oxford Economics, comments: “We expect a sharp rebound in 2021, supported by expansionary fiscal and monetary policies, but the economy will remain below its pre-crisis trend as the tourism sector is unlikely to recover its 2019 level until 2023.”