Thursday, November 30, 2023

Unfulfilled economic goals for the first quarter of 2023

The comparative method is useful when you want to determine the level of fulfillment of the goals, similarities or differences between two or more facts registered in a systematic way and complying with the rigor. In the case of the economy, using parallelism is useful, in order to understand the behavior of the variables involved during a defined time, which in the case of this opinion refers to the performance of the first quarter of 2023 compared to that of 2022 and in In some cases, the recorded value versus the projected value for the current year.

The key economic variables selected for the descriptive comparative exercise of the Dominican economic performance of 2023 refer to the gross domestic product (GDP), the inflation rate, the exchange rate, public spending, tax revenues, the financial balance of the budget , the balance of the debt, the international reserves and the bank interest rate.

About GDP

In the macroeconomic panorama that the official entities formulated for the 2023 national budget, a real GDP growth of 4.5% was projected. More recently, in March of the current year, a re-estimate was made, adjusting it downwards to 4.25%.

The aforementioned new estimate is probably due to the behavior registered in the Dominican economy in its first two months of the year, which has been 1.1% year-on-year and the accumulated 1.8%, when for the same time in 2022 the economy showed a better performance. , reaching 5.8% year-on-year and accumulated 6%, evidencing a strong contraction of the order of 4.7 and 4.2 percentage points, respectively.

Rate of inflation

The inflation target established in the 2023 monetary program is 4%, seen not as a range; however, the value registered as of March interannual is 5.90% and the accumulated value stands at 0.96%, indicative that the general level of prices in the third month deviates by 1.90 percentage points from the agreed goal.

The aforementioned behavior shows a loss of intensity in the performance of prices compared to 2022, which registered 9.05% year-on-year and accumulated 2.80%. Despite the good news, when examining core inflation, associated with the incidence of domestic monetary policy, it stands at 6.16% year-on-year and accumulated 1.39%, showing a strong deviation when compared to the target and a sign that it is still early to celebrate victory.

The inflationary issue permanently shows a clash between the official data against the inflation that the social imaginary builds from its reality. Perhaps the aspect that helps to understand the disagreement is the relative prices, which, when comparing the movement of prices, particularly with the inflation rate, proves that both are right: meanwhile, the year-on-year inflation rate as of March is 5.90%, that of the relative prices of a basket of 13 highly consumed products in the Dominican diet places the increase in prices at 13.69%, placing this data closer to the complaint of the people.

Exchange rate

The indicated macroeconomic outlook for 2023 also records an average exchange rate of RD$57.20, for an annual depreciation equivalent to 3.72% of the Dominican peso.

Although it may be early for the comparative exercise, the truth is that the exchange rate for the end of the first quarter was placed at RD$55.17, when at the beginning of the year it was RD$55.98, evidencing an appreciation of the order of 1.44%. and as of April 24, it stood at RD$54.71, showing a continuation of the appreciation of the Dominican monetary sign (2.26%) and, in addition, going in the opposite direction to the projected depreciation for the current year, this result having various effects from favorable to unfavorable, depending on the sector of the economy.

Public spending

The level of public spending reached the amount of RD$300,681.3 million as of March 31, 2023 and that of 2022 for that same month was RD$231,815.7, similar to a growth rate of the order of 29.7%.

The variation of the growing public spending contemplated for 2023 with respect to 2022 is 6.29%, meaning that the expansion of the total inter-quarterly spending between the two years reaches 23.41 percentage points, a value much higher than the estimate for the entire year and apparently will continue. at least for the fourth month, given that as of April 14 the amount spent amounted to RD$335,640.8 million.

tax revenue

On the side of tax revenue, at the end of the third month it was RD$243,274.3 million, while the estimate is RD$260,001.4 million, which is equivalent to a breach of the target amounting to RD$16,727.1 million for the quarter.

As of April 14, tax revenues were at RD$280,542.2 million, a level that shows the continuation of the gap between what is actually collected and what is estimated. For the first three months and two weeks, the income must have reached the amount of RD$303.335 million.

Financial balance

The negative financial result of the budgetary execution registers a value of RD$57,407.0 million for the first quarter of the year, when compared with the forecast deficit for the same period, which is RD$51,893 million, means that the aforementioned accrued negative balance exceeds that contemplated in an amount of RD$5,514 million.

NFPS debt balance

As of February 28, 2023 -the most updated data-, the debt balance of the non-financial public sector (SPNF) amounted to US$54,556.1, for a year-on-year increase of 8%, equivalent to US$4,054.5 million, when compared to the balance for the same month of 2022, which was US$50,501.6 million. In short, public debt continues to grow.

International reserves

The amount of net international reserves as of March 2023 stands at US$16,061.8 million, an amount much higher than that registered for the same month in 2022, which was US$14,596 million.

The monetary program for the current year foresees an increase of US$ 300.0 million in net reserves, which indicates that with the balance registered as of March, the established goal is easily met.

The high level of the aforementioned reserves can partially explain the appreciation of the peso against the dollar observed in the local exchange market.

bank interest rate

The behavior of the bank interest rate that has gone from 11.10% in March 2022 to 15.43% at the end of the same month, but in 2023, is the result of the transfer of the increase in the monetary interest rate from the Central Bank, which it went from 3.0% to 8.5% and in turn the transfer effect of the indicated rate has also been transferred to the behavior of the economy, making it contract, without yet achieving the established inflation target.

As it has been possible to read in the narrative of the behavior of the key variables of the Dominican economy, the performance of the first quarter does not show a positive balance and may presage by the end of 2023 a year with lower and adverse economic results than that of 2022.


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