The Dominican economy grew 7.0% in 2018, maintaining an
above-potential expansion and leading growth in Latin America.
The dynamism of economic activity was mainly driven by private
investment and consumption, in a context of favourable monetary
conditions. In particular, interest rates remained stable,
while private sector credit grew close to 11% year-on-year.
During the second semester of 2018, the monetary policy
stance became more neutral, in consideration of oil price hikes
and the prospects of an accelerated US monetary policy
normalisation. Consequently, the Central Bank of the Dominican
Republic decided to increase the monetary policy rate (MPR)
from 5.25% to 5.50% per annum in July 2018.
Following the above-mentioned monetary policy measure,
inflationary pressures slowed down as a result of lower food
and beverage prices, as well as a significant decrease in oil
prices in the last quarter of the year. In this context,
inflation ended 2018 at 1.17%, below the lower limit of the
target range of 4.0% ± 1.0%.
Additionally, macroeconomic stability and the dynamism of
foreign exchange inflows, from sectors such as tourism,
remittances and foreign direct investment, contributed to a
current account deficit of 1.4% of the gross domestic product
(GDP) in 2018, below its historical average. In particular, the
Dominican economy received more than 6.5 million tourists, with
tourism revenues of $7.56 billion. The strong performance of
the external sector contributed to the relative stability of
the exchange rate and the accumulation of international
reserves, which reached $7.63 billion at the end of 2018,
equivalent to 4.2 months of imports.
In addition, the consolidation of the public finances
continued, as the non-financial public sector (NFPS) balance
reached -2.7% of GDP. This has led to a significant reduction
of the 'twin deficits', fiscal and current account, which
reflects the strengthened macroeconomic fundamentals of the
The Dominican financial sector is solvent and presents
adequate levels of capitalisation and liquidity. The total
assets of the financial system increased 8% year-on-year in
2018, while the solvency ratio was above 17%. In addition,
financial institutions on average registered a return on equity
(ROE) ratio of 19.1% and a return on assets (ROA) of 2.3%,
while the non-performing loans ratio was only 1.6% during
For 2019, the Central Bank projects that economic activity
will grow at around 5.5%, gradually converging to its potential
of 5.0% in 2020. Forecasts suggest that inflation would reach
the lower limit of the target range of 4.0% ± 1.0% at
the end of the year of 2019, approaching the centre of the
target by 2020.