A Guiding Hand

What economic sectors have contributed the most to the country’s growth this year?

By September 2016, the country had growth of 6.9%. Basically, the trends in commodity prices such as oil and gold, as well as the recovery of the US economy, have been two beneficial factors for our strong performance. In reference to gold, we have a joint venture with Barrick Gold and production volumes are at full capacity at 1 billion metric tons. The extraordinary evolution of the tourism industry has also been a key factor, showing 9% growth so far this year. We believe we can reach over 6 million visitors this year, which will generate more than USD6.5 billion. At the same time, FDI has maintained a positive trend over the last decade, with an average of USD2.4 million every year. In 2016, we expect to close with USD2.5 billion in FDI. The construction industry has also had a great positive impact on the growth of the national economy and the agricultural sector has experienced double-digit growth in 2016.

What are the main risks the Dominican economy faces in 2017?

We expect the oil price to stay between USD55 and USD60 per barrel, but we face risks if the price goes above that, as hydrocarbons represent about 30% of our imports. High oil prices can also lead to high inflation. What’s more, the interest rates set by the US Federal Reserve are a factor we always have to consider. Those interest rates have an impact on debt payments, as well as other factors in the economy. Finally, there is always the risk of climatological factors and catastrophes due to the geographic location of the country. On the other hand, I want to highlight our macroeconomic and microeconomic stability and social peace as elements that are key to attracting FDI. In this context, we recently changed our monetary policy by raising interest rates, which is set to help us cope with the expected Fed rate hike.

What other policies will the Central Bank pursue in 2017 to combat these risks?

The Central Bank has to create the conditions under which the productive sectors have access to financing tools that enable them to develop their activities. In this context, our priority is macroeconomic stability in terms of the exchange rate, the strength of the financial sector, an increase in reserve requirements for the banks, and above all, control of the inflation level. We will finish 2016 with an inflation rate that, in the worst-case scenario, is around 1.3%. At the same time, exchange rate depreciation must not reach 3%. I would like to add also that bank credit has expanded by 12% in the private sector this year. We tried to manage the monetary policy so that this is inclusive, enabling SMEs to have access to credit lines and further develop the conditions to attract business to the country. We expect to close 2016 with GDP growth of around 6.5%, positioning us as the leader in Latin America for yet another consecutive year. The last two years we managed to grow our GDP by 7%. The potential growth of the national economy stands at 5.5% in 2017, a goal we are fully committed to reaching. The current account deficit stands at 1.7% of GDP this year and will be 2% in 2017. In this regard, the government has a fiscal objective to have in the budget a deficit of 2.3%, which includes a 0.8% primary surplus of GDP.

What role do remittances play in the Dominican economy?

In general terms, our economy generates between USD24 billion and USD25 billion in revenues. Of this, the tourism industry generates USD6.5 billion, FDI generates USD2.4 billion, and remittances generate USD5.1 billion. Remittances are an important contributor of hard currency for the economy and will always be important. As long as the US economy stays strong, that figure will increase.