dominican economy performance post-crisis recovery · banco central de la repÚblica dominicana ....

BANCO CENTRAL DE LA REPÚBLICA DOMINICANA

DOMINICAN ECONOMY PERFORMANCE

POST-CRISIS RECOVERY

January, 2011


PRESENTATION OUTLINE

• DOMINICAN ECONOMY GROWTH CHARACTERISTICS

• GLOBAL CRISIS EFFECT IN THE DOMINICAN ECONOMY

• FACTORS THAT HAVE DRIVEN THE ECONOMIC GROWTH 2009-2010

• ACTUAL SITUATION: ECONOMIC RECOVERY POST-CRISIS


GROWTH CHARACTERISTICS: After the economic and financial crisis in Dominican Republic (2003-2004), follows a process of Economic recovery : • Macroeconomic stability with sustainable economic growth: Average economic growth 2005-2007: 9.5% • Local prices stability: One digit inflation Average Inflation 2005-2010: 6.3%. • Exchange Rate: Average variation of the DOP depreciation: 1.7%. • Relatively Low Interest Rates. • Close coordination between Monetary and Fiscal policies. • The Private sector as the primary economic growth sponsor.


-

5.0

10.0

15.0

20.0

25.0

30.0

35.0

40.0

J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N D

2004 2005 2006 2007 2008 2009 2010

Active and Passive Interest Rates (%) Weighted Average (2004-2010)

Active Passive

13.6%

5.8%


29.2

28.8

29.6

33.1

33.8

32.5 32.8 33.4

33.3

32.3 33.1

33.5 33.9 34.1 34.6

35.2 35.6 35.9

36.1 36.1 36.2 36.7

37.0 37.3

20.0

22.0

24.0

26.0

28.0

30.0

32.0

34.0

36.0

38.0

40.0

J-M A-J J-S O-D J-M A-J J-S O-D J-M A-J J-S O-D J-M A-J J-S O-D J-M A-J J-S O-D J-M A-J J-S O-D

2005 2006 2007 2008 2009 2010

Exchange Rate DOP/USD

2005-2010

The average variation of the DOP depreciation during 2005-2010 was 1.7 percentage points per year.


-

2.0

4.0

6.0

8.0

10.0

2005 2006 2007 2008 2009 2010

7.4

5.0

8.9

4.5

5.8 6.2

Dominican Republic Inflation (%) 2005-2010

Average Inflation: 6.3%


1. Monetary Policies: Expansive policies • Interest rates reduction Bank financing to private • Legal Reserve requirements dismount sector increase: • Direct Window closure April 09 - Dic. 2010: 19.6%

2. Stand-by arrangement with IMF:

• Greater Foreign Financing • Inversion Environment Development

3. Countercyclical Fiscal Policy :

• Greater fiscal impulse: Inversion y social expenditure.

4. Economic growth focused on Local Demand, with Construction, Commerce, Communications, Financial Intermediation, Local Manufacturing and Hotels as the main activities sustaining economic growth.

5. Gradual recovery of the principal activities that generates currencies directed to foreign demand: National goods exports, Free Zones, Tourism.

6. Goods and Services Foreign Demand Increase: Haiti catastrophe.

FUNDAMENTALS OF THE DOMINICAN REPUBLIC ECONOMIC RECOVERY 2009-2010


2005 2006 2007 2008 2009 2010* GDP 9.3 10.7 8.5 5.3 3.5 7.8

2.0

4.0

6.0

8.0

10.0

12.0

Gross Domestic Product 2005-2010*

Constant Growth Rates (%)

*Preliminary data.


(2.0)

-

2.0

4.0

6.0

8.0

10.0

12.0

J-M A-J J-S O-D J-M A-J J-S O-D J-M A-J J-S O-D J-M A-J J-S O-D

2007 2008 2009 2010

9.2

5.5

8.9

10.3

5.7

9.6

(0.6)

6.5

1.0 1.8

3.4

7.5 7.5 7.5 7.7 8.4

Quarterly Gross Domestic Product Constant Growth Rates (%)

2007-2010 8.5% 7.8% 3.5% 5.3%


Economic Activities Performance Growth Rates 2005-2010 (%)

(Reference Year = 1991)

05/04 06/05 07/06 08/07 09/08 10/09 Average2005-2010

Agricultural 5.9 8.6 1.2 (3.4) 12.5 5.6 5.1 Mining (0.1) 11.0 (1.4) (30.3) (51.9) 3.2 (11.6) Local Manufacture 7.6 5.7 4.8 3.2 1.0 8.6 5.1

Manufacture of Grain Mill Products 9.3 10.8 4.6 3.4 5.1 22.3 9.3 Manufacture of Sugar (9.9) 2.2 (0.4) 0.7 4.5 (2.5) (0.9) Manufacture of Beverages and Tobacco 11.5 0.6 (6.5) 4.3 (8.9) 22.3 3.9 Manufacture of coke, Refined Petroleum Products (4.9) 1.7 (16.5) 9.1 (6.9) 7.4 (1.7) Other Manufacturing Industries 7.8 6.8 7.2 3.1 2.4 6.9 5.7

Free Trade Zone Manufacture 0.9 (8.0) (10.0) (1.1) (14.6) 0.4 (5.4) Construction 9.2 24.6 3.2 (0.4) (3.9) 10.1 7.1 Services 8.7 10.7 9.3 8.2 4.9 7.5 8.2

Electricity and Water 4.8 6.3 9.7 10.3 3.0 6.4 6.8 Commerce 15.8 11.3 13.9 5.0 (2.8) 12.1 9.2 Hotels, Bars and Restaurants 9.0 4.9 3.7 3.4 (3.5) 7.0 4.1 Transport and Storage 8.7 4.0 6.8 4.2 0.5 6.7 5.1 Communication 24.8 24.8 14.9 19.9 14.0 8.4 17.8 Financial Intermediation, Insurance (0.7) 23.6 25.6 13.7 8.3 11.3 13.6 House Rentting 3.2 2.8 3.5 3.3 3.1 3.1 3.2 Public Administration and Defense; Social Security (0.1) 4.7 1.9 0.7 2.6 1.2 1.8 Education 2.7 3.2 5.7 2.6 4.5 5.9 4.1 Health (1.1) 1.6 2.8 1.3 4.3 4.6 2.3 Other Services (2.2) 7.7 5.2 4.8 6.9 4.3 4.4 Financial Intermediation Services Indirectly Measured 33.5 16.9 22.1 20.1 5.0 10.2 18.0

Value Added 7.7 9.1 6.2 4.9 3.2 7.5 6.4 Taxes less Subsidies on Products 28.6 27.3 28.3 7.6 5.4 10.1 17.9 Gross Domestic Product 9.3 10.7 8.5 5.3 3.5 7.8 7.5

DetailGrowth Rates (%)


3,691.4 6,421.4

12,649.8 13,102.6 14,567.0 17,599.6

73,320.8

Manufacturing Agriculture Mortgage Consumption Construction Commerce Total

Loans to Private Sector Millions of DOPs

(2009-2010)


Productive Activities

82.1%

Credit Cards and Other

Consumption Loans 17.9%

Loans to Private Sector Percentage Distribution Millions of DOPs (2009-2010)


*2010: January-September.

15.4

12.0

8.9 7.8

4.9

7.6

13.1

20.8

12.4

9.2

-14.7

21.0

-1.2

0.7 3.2

-4.0

-7.4

10.0 11.3

8.2 6.8

4.7

-9.8

15.4

9.3 10.7

8.5

5.3

3.5

7.6

-20.0

-15.0

-10.0

-5.0

0.0

5.0

10.0

15.0

20.0

25.0

2005 2006 2007 2008 2009 E-S 2010*

GDP Expenditure Based Constant Growth Rates (%)

2005-2010*

Final Consumption Gross Capital Formation Exports Imports Gross Domestic Product


-7.0 -1.6

1.0 1.9

2.5 2.5

3.0 3.5

3.8 4.0 4.0

5.3 5.3

6.0 6.3

7.0 7.7

8.4 8.6

9.0 9.7

-8.0 -6.0 -4.0 -2.0 0.0 2.0 4.0 6.0 8.0 10.0

Haití Venezuela

El Salvador Cuba

Guatemala Honduras Nicaragua

Ecuador Bolivia

Colombia Costa Rica

Chile México

América Latina y el Caribe Panamá

República Dominicana* Brasil

Argentina Perú

Uruguay Paraguay

Latin America and The Caribbean Estimated Growth 2010 (%)

Latin America data source: ECLAC

Dominican Economy would grow 7.8% according to the estimations of the Central Bank.


2004 2005 2006 2007 2008 2009 2010*

2,548

3,739 3,904

4,405

4,798 4,816

5,282

Dominican Republic GDP per Cápita (US$)

2004-2010*

* 2010 Projected.


19.7 18.4

17.5 16.4 16.0 15.6 15.5

14.0 14.2 14.9 14.9 14.4 14.1

Oct. 2004

April 2005

Oct. 2005

April 2006

Oct. 2006

April 2007

Oct. 2007

April 2008

Oct. 2008

April 2009

Oct. 2009

April 2010

Oct. 2010

Extended Unemployment Rate 2004-2010 (%)

Source: National Workforce Survey.


3,240,504

3,258,029

3,294,717

3,404,177

3,465,995

3,525,136

3,571,472

3,649,901

3,664,490

3,577,258

3,608,154

3,738,594

3,768,362

3.0

8.0

13.0

18.0

23.0

3,000,000

3,100,000

3,200,000

3,300,000

3,400,000

3,500,000

3,600,000

3,700,000

3,800,000

3,900,000

Oct 2004 April 2005

Oct 2005 April 2006

Oct 2006 April 2007

Oct 2007 April 2008

Oct 2008 April 2009

Oct 2009 April 2010

Oct 2010

Workforce Unemployment Rate (%)

Workforce vs Extended Unemployment Rate 2004-2010

14.1%

In the October 2004-October 2010 period, 589,003 new jobs has been created.

160,208 new jobs in 2010

19.7%


Source: National Workforce Survey.

5.6 5.4

5.8

5.1 4.7 4.6

4.3 4.2 4.2 4.4

5.1

4.5 4.5

Oct. 2004

April 2005

Oct. 2005

April 2006

Oct. 2006

April 2007

Oct. 2007

April 2008

Oct. 2008

April 2009

Oct. 2009

April 2010

Oct. 2010

Open Unemployment Rate 2004-2010 (%)


Source: Economy, Planning and Development Ministry and World Bank.

35.3 36.0

42.5 43.4 40.9 40.1

37.6 36.3 35.8 35.8 35.2

37.8

33.5 34.6 33.2

Dominican Republic Poverty Rate(%) 2003-2010


-4.6 -3.6 -3.2

-1.5 -1.2

0.0 0.0

2.0 2.6

4.7 5.0

6.5 7.4

10.5

NIC ARG RD URG PAR BOL HON BRA PER MEX GUA COL CHI CRI

Exchange Rate Performance in Latin America 2010 (%)

Appreciation (raise of value respect to USD)

Depreciation (loss of value respect to USD)

Appreciation

Depreciation

Source: Latin America Central Banks.


0

2

4

6

8

10

12

14

16

18

20

May-08 Jul-08 Sep-08 Nov-08 Jan-09 Mar-09 May-09 Jul-09 Sep-09 Nov-09 Jan-10 Mar-10 May-10 Jul-10 Sep-10 Nov-10

Country Risk (Spread) May 2008 – December 2010*

República Dominicana América Latina

The Dominican Republic Country Risk is below the

Latin America average.

DR:298

LA:322

Source: Bloomberg

*Data until December 20, 2010.

Dominican Republic Latin America


2009 2010 Absolute Relative

Total Exports (goods) 5,519.0 6,546.5 1,027.5 18.6

I. National Exports 1,685.6 2,570.3 884.7 52.5 1. Commodities 1,352.8 2,155.1 802.3 59.3 -Sugar and Other Sugar Cane derivatives 121.1 181.9 60.8 50.2 -Coffee and Other Manufactures 19.6 8.6 -11.0 -56.1 -Cocoa and Other Manufactures 165.7 181.4 15.7 9.5 -Tobacco and Other Manufactures 11.8 11.7 -0.1 -0.8 -Ferronickel 4.1 -4.1 -100.0 -Silver -Minor Products 1,030.5 1,771.5 741.0 71.9 2. Non-Monetary Gold 0.0 3. Port-Acquired Goods 332.8 415.2 82.4 24.8 -Fuel 313.2 394.8 81.6 26.1 -Food 19.6 20.4 0.8 4.1

II. Free Zones 3,833.4 3,976.2 142.8 3.7

ConceptJanuary - December Variation (2010/2009)

Total Exports 2009-2010 (Millions of USD)


* Preliminary data.

Tourist Arrival by Air 2007-2010

08/07 09/08 10/09 08/07 09/08 10/09

Total 4,428,005 4,398,743 4,414,756 4,586,264 -29,262 16,013 171,508 -0.66 0.36 3.88

Residents 448,423 419,071 422,453 461,721 -29,352 3,382 39,268 -6.55 0.81 9.30 Dominicans 401,974 373,339 375,873 410,913 -28,635 2,534 35,040 -7.12 0.68 9.32

Foreigners 46,449 45,732 46,580 50,808 -717 848 4,228 -1.54 1.85 9.08

Non Residents 3,979,582 3,979,672 3,992,303 4,124,543 90 12,631 132,240 0.00 0.32 3.31 Dominicans 581,208 531,942 576,687 603,433 -49,266 44,745 26,746 -8.48 8.41 4.64

Foreigners 3,398,374 3,447,730 3,415,616 3,521,110 49,356 -32,114 105,494 1.45 -0.93 3.09

Detail 2007 2008G.R. (%)

2009 2010*Absolute Variation


*2010: January-September.

11.3

8.2 6.8

4.7

-9.8

15.4

9.3 10.7

8.5

5.3 3.5

7.6

-15.0

-10.0

-5.0

0.0

5.0

10.0

15.0

20.0

2005 2006 2007 2008 2009 E-S 2010*

Imports and GDP Constant Growth Rates (%)

2005-2010*

Imports Gross Domestic Product


2009 2010 Absolute RelativeF.O.B. Imports (goods) 12,259.8 14,737.9 2,478.1 20.2Merchandise (Local) 9,943.2 12,378.1 2,434.9 24.5

Petroleum and derivatives 2,641.0 3,464.6 823.6 31.2Mineral coal 84.8 85.2 0.4 0.5Wheat 113.7 126.2 12.5 11.0Sugar 4.6 25.9 21.3 463.0Capital goods for free zones 46.8 35.5 -11.3 -24.1Free zone commercial goods 41.1 46.8 5.7 13.9Tax-free goods 1,855.2 1,763.5 -91.7 -4.9Tax-free vehicles 47.8 33.3 -14.5 -30.3Other products 5,108.2 6,797.1 1,688.9 33.1

Free Zones 2,316.6 2,359.8 43.2 1.9Non petroleum Imports 7,302.2 8,913.5 1,611.3 22.1

January-December Variation (2010/2009)Concept

Total Imports 2009-2010 (Millions of USD)


Macroeconomics Assumptions Central Bank Monetary Program

Variables 2011

Constant GDP (Millions of DOP referenced to 1991) 384,896.5 Growth Rate 5.5%

Current GDP (Millions of DOP) 2,115,307.9 Growth Rate 11.20%

Current GDP (Millions of USD) 54,238.7 Growth Rate 4.92%

Inflation to December 5.88%Average Inflation 6.37%GDP Deflactor 5.40%

Petroleum Price (USD/Barrel) 85.87 USA Constant GDP Growth (%) 2.3%


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