2024-05-12 21:21:57
He Central Bank of the Dominican Republic (BCRD) presented a press document this Sunday, explaining the “positive” effects that monetary policy has had on the recovery of growth and the reduction of inflation in the post-pandemic.
The monetary authority indicated that it implemented a monetary politics restrictive after the supply shock caused by the coronavirus pandemic, as well as the war between Russia and Ukraine, which exacerbated price pressures by reducing the supply of commodities. In this sense, the Central Bank indicated that monetary policy achieved a gradual convergence of inflation from 9.64% in April 2022 to 4.43% in May 2023, placing it in the target range of the monetary program.
It was as of June 2023, when the issuing entity began a gradual reduction of its monetary policy rate from 8.50% to 7.0%. Likewise, he specified that the Monetary Board approved a monetary expansion program of almost 3.0% of the gross domestic product (GDP), aimed at stimulating economic activity.
These resources, channeled to companies, mainly micro, small and medium-sized (MSMEs) and households, by financial intermediaries, for an average term of two years and with guarantee of titles from the Ministry of Finance or the BCRD, have been decisive in the recovery economic in an environment of price stability, he said.
Economic recovery and monetary measures
According to the monetary institution, the liquidity expansion program authorized by the Monetary Board in 2023 amounted to RD$205 billion, placed by the BCRD to financial intermediation entities (EIF) through a combination of release of legal reserve and instrument known as rapid liquidity facility (FLR).
Of the total approved by the Monetary Board, the EIFs have placed some RD$196 billion (96% of the total) at interest rates no higher than 9% annually to encourage domestic credit.
The flow of resources placed by the BCRD in the economy through financial entities was decisive in the acceleration of credit growth to the private sector in national currency, which went from a year-on-year expansion of 13.6% in June 2023 to a growth of 21.3%. % in March 2024, according to the Central Bank, which also adds that in absolute terms, since June 2023, financial intermediaries have placed RD$260,000 million to companies and households, representing the RD$196,000 million coming from the release of BCRD resources , 76% of the increase in private credit in national currency.
The Central Bank highlighted that the influence of credit dynamism on the economy is seen in the most recent report on the evolution of the monthly economic activity indicator (IMAE). Indeed, the IMAE presented an accumulated growth for January and February of 5.4% year-on-year, also observing a gradual recovery of the Dominican economy since July 2023.
He also highlighted that there was a change in the growth trend after the first half of 2024, based on the measures of the Monetary Board. The acceleration of public investment towards the end of 2023 and beginning of 2024 also contributed to this growth, he indicates.
Growth of productive and quality credit
In addition to the impact of the liquidity expansion measures on credit and economic activity in the Dominican Republic, the reduced cost of financing for final debtors, as a result of these policies, has been a contributing factor in the overall quality of the credit portfolio as a whole, as the main determinant of the growth of the banking sector, establishes a statement from the Central Bank.
Indeed, from May 2023 to March 2024, the current credits of the financial system in national currency, that is, those whose interest and capital payments are up to date according to the terms assumed by the debtors, showed a growth of 17.7 %, higher than the 12.6% observed for the same comparable interval in 2023, explains the monetary authority.
This, according to the BC, has contributed to the Dominican financial system registering a delinquency rate in its credit portfolio of only 1.2% as of March 2024 and offsetting the maturity of loans granted with resources from liquidity measures adopted during the covid-19 pandemic.
Detailing the analysis by economic sector, the liquidity measures implemented by the monetary and financial authorities in 2023 were mainly aimed at the productive sectors of commerce, construction, manufacturing, agriculture and export, among others, for an approximate amount of RD $166 billion.
When the nominal growth of private credit in national currency is observed before and after June 2023, changes are seen in the credit dynamics of these economic sectors, mainly in manufacturing, agriculture, construction and commerce, which went from low or negative growth, to positive and significant variations, as shown in the following graphs:
According to the issuing entity, this is consistent with the trend of sustained dynamization that the Dominican economy has exhibited, mainly in the construction, manufacturing, agriculture and commerce sectors, which has been achieved alongside the sustained strength of the system. financial.
Likewise, the releases of legal reserves for the granting of loans for low-cost housing for an authorized amount of RD$21,424 million, have impacted the living conditions of families usually not served by the financial system.
In effect, as of March 2024, the EIFs had channeled RD$18,238 million of the authorized amount, of which RD$13,855 million were placed in loans for the acquisition of some 6,293 new low-cost homes, with a term of up to five years and no interest rate. greater than 9%.
The remaining amount of RD$4,383 million was allocated to interim loans, with a term of two years and interest rates of up to 9%, for the financing of 53 construction projects of this type of low-cost housing. It is expected that at the end of this measure some 13,000 new affordable homes will have been financed.
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