Country Economic Forecasts > Dominican Republic

Economic activity continues to expand at a rate above potential, although recent data suggest that the pace of growth has moderated somewhat. Notwithstanding strong domestic fundamentals, we believe that external conditions will weigh on activity, dampening growth to 5.9% this year and 4.5% in 2017.Inflation remains well below the 4% +/-1% target, at just 0.9% in October, with falling food prices dampening the headline rate in recent months. Going forward, we expect inflation to move back inside the target range, reflecting both the impact of strong economic growth and higher oil prices. Indeed, at its October policy meeting the central bank raised its policy rate by 50bp to 5.50% in order to anchor inflation expectations and limit any currency depreciation caused by likely developments in US interest rates. But the changing nature of US economic policy under Donald Trump's presidency may place further upward pressure on interest rates. Meanwhile, the government also moved to slow its spending in H2 2016 to contain the budget deficit.