Monday, November 6, 2017

Dominican Republic: economic update October 2017

Annual inflation rate was 3.8% in September just below the 4% BCRD target.
The BCRD reduced its official rate by 50 basis points from 5,75% to 5.25% on July 31, 2017 since then the annual inflation rate and monetary aggregates have inched slightly higher:

Economic activity has not already showed too much reaction to the more accomodative BCRD monetary policy: the monthly indicator of economic activity has stopped its downtrend and it may have bottomed while the loans dynamic remain in its downward trend.

IMAE Y/Y growth rate and its yearly average

Hard currency inflows from tourism and foreign remittances remain strong showing solid growth rates.
September 2017 low foreigners' arrival in the Dominican ariport are clearly a result of the bad hurrican season (IRMA and MARIA) and should be trated as an outlier.

The Dominican Republic 5.95% USD sovereign bond maturing in 2027 is still very well bid trading close to its all time high (and lowest spread over Treasuries) and has not showed any sign of weakness or contagion so far despite some emerging markets concern about Venezuela debt restructury.

We have noticed a reduction in BCDR foreign reserves over the last 2/3 months and this must be monitored in the coming months: