Thursday, March 23, 2023

Inflation drops 0.86 percentage points and stands at 6.38% in February

The Central Bank of the Dominican Republic (BCRD) reported that the inflation rate was placed at 6.38% in February, which represents a reduction of 0.86 percentage points compared to January of this year, when it stood at 7.24%.

This was explained by the monetary entity during the press release in which they announced the monthly variation of the Consumer Price Index (CPI), which for this month that ended was 0.11%.

The BCRD indicates that monthly core inflation was 6.40% at the end of February 2023, lower than the 6.60% observed in January. This indicator makes it possible to extract clearer signals for the conduct of monetary policy since it excludes some items that do not respond to monetary conditions, such as foods with great variability in their prices, as well as fuels and services with regulated prices such as electricity rates, transportation, in addition to alcoholic beverages and tobacco.

Inflation February 2023

The institution explains the downward behavior of inflation to the fact that the inflationary dynamic continues to respond favorably to the combination of monetary policy measures adopted by the Central Bank and government subsidies for fuel and the agricultural sector, together with the freezing of the tariff electrical.

In addition, the prices of most commodities continue to moderate with respect to the levels registered in previous months, at the same time that the costs of container transport at a global level have decreased “considerably”.

Regarding the behavior of the Dominican economy, the institution reports that it has experienced a moderation in its growth rate since the fourth quarter of 2022, as was foreseeable, associated with a slowdown in domestic demand, mainly evidenced in the investment component by the contraction in construction activity.

Indeed, during the month of January of this year, the Monthly Indicator of Economic Activity (IMAE) registered an interannual variation of 0.4%, explained to a greater extent by the performance of construction, which continues to reflect the increase in the costs of main inputs in this sector such as cement, rods, paints, which caused an increase in housing prices.

Likewise, another factor that has influenced the behavior of this activity has been the readaptation of construction schedules due to the effect of higher market interest rates. In addition, the execution of public investment spending has been below the speed originally contemplated in the General State Budget.

The BCRD expects that, once year-on-year inflation converges to the target range established in the Monetary Program of 4%±1% during the year 2023 and that the conditions are in place for the start of the normalization of monetary policy, this should contribute to that the year-on-year expansion of the Dominican economy gradually recovers.

In this vein, international organizations such as the International Monetary Fund (IMF), the World Bank and the Economic Commission for Latin America and the Caribbean (Cepal), place the country as one of the fastest growing in the region this year. .

Variation by groups

When analyzing in detail the behavior of the general CPI, it shows that the group with the greatest contribution to low inflation in the month of February 2023 was Food and Non-Alcoholic Beverages, registering a negative variation rate of 0.44%. In addition, the result of -0.79% of the Communications group index had an impact. Conversely, the groups Miscellaneous Goods and Services (0.80%), Restaurants and Hotels (0.86%) and Housing (0.30%) contributed.

The variation of -0.44% in the price index of the Food and Non-Alcoholic Beverages group is mainly due to the price decreases observed in items with a high weight in the family basket such as green plantains (-8.63%), potatoes (- 16.50%), onions (-13.43%), chili peppers (-7.33%), ripe plantains (-6.79%), garlic (-8.45%), tomatoes (-4.85%) and fresh chicken (-0.19%), while other food goods registered increases in their prices such as sour lemons (16.76%), pasteurized orange juice (3.50%), eggs (1.30%), pork (1.39%), chicken broth (1.75%), green pigeon peas (6.20%) and rice (0.33%).

The price index corresponding to the Communications group reflected a variation of -0.79% in February 2023, basically due to the -2.52% drop in the prices of the combined telephone, pay television and internet services, specifically in streaming services.

Regarding the price index of the Miscellaneous Goods and Services group, it grew 0.80% during the month of February 2023, mainly due to the price increases registered in services and personal care items, which varied 1.01% and 0.84%, respectively. The 0.30% growth in the CPI of the Housing group is basically explained by the 0.63% increases in housing rental services and housing maintenance (0.34%).

The CPI of the Restaurants and Hotels group varied 0.86% essentially due to increases in the prices of food services prepared outside the home such as dish of the day (0.79%), sandwiches (0.84%) and juices served outside the home (0.93%) . It is important to note that the rise in the price index observed for this group is the result of increases in the prices of the basic inputs for its preparation, including meats, oils, rice, breads, sausages, fish, cheese, among others, which directly affect the consumer price of these food services.

Inflation of tradable and non-tradable goods

The CPI for tradable goods and services, those that can be exported and imported without restrictions, did not register changes in the variation for the month of February 2023. Meanwhile, the index for non-tradable goods and services, which by their nature only can be marketed within the economy that produces them or are subject to measures that limit their imports, registered a variation of 0.22%.

Inflation by geographic areas

The results of the CPI by geographical regions in the month of February 2023, show that the index of the Ozama region, which includes the National District and the Santo Domingo province, varied 0.17%, in the North region -0.03%, East region 0.30 % and the South region 0.04%.

The negative inflation verified in the CPI of the Northern region, is explained by the higher incidence of the Food and Non-Alcoholic Beverages group in said region. The greater variation registered in the index of the Eastern region is the result of the increase in prices of the housing rental service and the lower contribution of the drop in the CPI of the Food and Non-Alcoholic Beverages group in this geographical area.

Inflation by quintiles

Regarding the behavior of the CPI by socioeconomic strata, it shows that the quintiles with the lowest income, that is, 1, 2 and 3, registered variations of 0.08% in quintile 1, 0.05% in quintile 2 and 0.07% in quintile 3, due to that the increases registered in the Goods and
Miscellaneous Services and Restaurants and Hotels, were neutralized by the decreases in the prices of the Food and Non-Alcoholic Beverages group, which has a greater relative weight in the baskets of these quintiles. While the indices of the highest income quintiles (4 and 5), experienced variations of 0.03% and 0.16%, respectively, because in quintile 4, the increases in the CPI prices of the Miscellaneous Goods and Services group were offset due to the drop in the price of cars and food. In the result of the CPI of quintile 5, the rise in the prices of air tickets had an impact.


Please enter your comment!
Please enter your name here

Latest article