Given the expectation that the prices of goods will continue to increase in 2022 in the Dominican Republic due to external factors such as the rise in oil, the delay of containers and the increase in the cost of freight, Dominican economists have proposed that a form of the country counteract this situation is by reducing the money in circulation in the market. For this year, international organizations such as the International Monetary Fund (IMF), credit rating firms and the Economic Commission for Latin America and the Caribbean (ECLAC) have already presented that The Dominican economy will grow in 2022 above its potential, which is 5%.
However, the authorities must be alert to counter inflation, a global situation. The economist Jonathan D’Oleo Puig comments that the reduction of the money supply by the Central Bank would allow a drop in inflation. According to him, this decrease should be between 50 and 200 basis points and it is a strategy that should be implemented in stages. D’Oleo Puig indicates that it is necessary to maintain and improve the rate of growth of the Gross Domestic Product (GDP) in order to face inflation. “For this I recommend, among other things, to eliminate obstacles to development in the form of decrees that make it impossible for tourism development in areas such as Samaná and Barahona. The elimination or modification of these decrees would significantly increase all the components that affect the GDP, starting with investment, naturally”, he comments. For D’Oleo, in a general sense, it is necessary to have an inventory of the productive resources that are currently idle in the Dominican economic apparatus and proceed to implement policies to activate them and boost production in the short and medium term. The economist points out that with an increase in production, income increases, which, in turn, helps the average citizen to cope with inflation, but also suggests that people look for extra income.
I understand that on an individual level each person should look for ways and means to increase their income at a rate of at least 15 to 20% to successfully face the escalation in the prices of the products of the basic basket and other items”, he points out.
Current expenses
On this subject, D’Oleo adds that it is difficult to lower current expenses under the current situation. However, it can be significantly reduced through the elimination of subsidies to interest groups, such as the drivers’ union. “It can also be reduced considerably by controlling the use of public services, especially health and education, by people who are in the country irregularly. This must be done at the root of the problem, which is the situation on the border”, he considers.
Internal price control
Regarding inflation, the economist Arturo Martínez Moya reiterates that the price increases are worldwide, that is, that it is not a phenomenon exclusive to the Dominican Republic and that in the face of this situation, some measures must be taken internally that have to do directly with the local production. “There is an element that can also contribute to increases in domestic prices and that is the excess money in circulation in the economy. So, the Central Bank has provisionally raised the interest rate by 150 basis points and today it is at the level it was before the pandemic, that is, it has not been exceeded but was back to what it was in 2020,” says the economist. It recalls that from 2020 to 2021 the monetary policy rate had been lowered to encourage credit to the productive sectors, for which, in fact, the liquidity of the banking system that was made available to consumers and producers increased by 5%. Mainly small and medium-sized companies. Martínez Moya points out that last year oil and grains increased by more than 30%, which is maintained due to the bottleneck that exists due to the reduction of the workforce in the production of the fields and factories worldwide. The economist reflects that this has reduced supply, increased maritime freight and generated delays due to the lack of freight transport drivers due to the omicron variant. One solution presented by Martínez Moya is to relieve the weight of a crisis that comes from outside, trying to internally control the spread of the omicron so that there are as few absent workers as possible and the country can continue with the pace of production in the field and in the factories, and thus avoid reducing supply and increasing the prices of the products generated. We have to try to take the necessary sanitary measures that have to be taken and maintain them at whatever cost and not stop production. It is always better this way, spending whatever is on public health and keeping the spread of the variant under control so that the economy is not paralyzed because that does contribute to price increases,” says Martínez Moya.
Other strategies
The economist Antonio Ciriaco Cruz thinks that the Dominican Government must temporarily establish the subsidy for fuels because that is a mechanism to minimize and mitigate the negative effects of their prices worldwide. Ciriaco Cruz comments that despite the fact that President Luis Abinader has assured that the fuel subsidy will not be the same as last year, this situation is very forceful. In addition, the also vice-dean of the Faculty of Economics of the Autonomous University of Santo Domingo (UASD) considers that the government should establish a tariff amnesty for those inputs such as corn, wheat, edible fats, to prevent these commodities from having a negative impact on production costs, and thus avoid an impact on agricultural products and other basic products. In the case of current spending, Ciriaco Cruz says that the government should continue to deepen the rationalization of public spending and combat tax evasion as a mechanism to improve collections.
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