Inflation Opens The Door To A Period Of Austerity In The Dominican Republic

• Even though the Dominican Republic reported economic growth of more than 12%, cutting the budget and current expenses will be vital to face the rise in inflation, which started this year at 8.5%. 
• The increase in the monetary policy interest rate above the pre-pandemic level was the first measure implemented by the Central Bank of the Dominican Republic (BCRD) to face the increase in inflation. However, while higher inflation was expected to be transitory, a sustained rise in food prices, construction materials, and other goods and services, indicates that it will likely last until the end of the first half of this year. 
• The Dominican Association of Multiple Banks (ABA) has outlined that a significant proportion of small and medium-sized borrowers from productive sectors will not suffer as much from the increase in interest rates since many are covered by monetary stimuli arranged as a result of the pandemic. 
• Notably, after the health crisis broke out in 2020, the government made it easier to grant loans at fixed rates of 8% until July 2023. This will allow the country to overcome the transition to a path of sustained growth with adequate levels of inflation without major traumas.

(Source: Dominican Today)