Waning US Demand In H223 To Slow Growth In Dominican Republic

• Fitch forecasts that the Dominican Republic’s real GDP growth will slow from 4.9% in 2022 to 3.5% in 2023, primarily due to a weakening US economy in H223.
• Preliminary 2022 growth statistics were strong, coming in just below Fitch’s estimate of 5.0%, as resilient US demand for DR’s goods and tourism underpinned strong overall export growth (13.7%) and domestic employment, which sustained private consumption growth (3.3%). However, DR incomes and savings were likely diminished by a 5.2% contraction in remittance inflows in 2022 (the first recorded contraction in the data going back to 2010).
• The projected slowdown in the US will pose major headwinds to DR’s export and investment growth, which by extension will affect private consumption growth.
• Since the start of 2023, fading base effects and easing private demand have led to weak growth. Headline inflation remains elevated at 5.9% y-o-y, which suggests that households’ real incomes were muted, feeding into weaker demand.
• Owing to these factors, Fitch’s core view is that the Dominican Republic’s economy, like many other Caribbean markets, will be undercut by a mild recession in the US in H223, with growth slowing in the same period. Nonetheless, economic activity will pick up slightly as peak tourism season will support income growth.

(Source: Fitch Solutions)