The Governor of the Central Bank, Héctor Valdez Albizu, met with the directors of the Dominican Association of Housing Builders and Promoters (Acoprovi), headed by its president, Jorge Montalvo, in which the incidence of inflation and the rising construction costs in the sector.
Montalvo expressed Acoprovi’s appreciation to the Central Bank for the set of macroeconomic measures that made it possible to maintain the dynamism of the construction sector at the time of the Covid-19 incidence, and even currently achieve greater dynamism than the pre-pandemic period.
He highlighted the good resilience achieved by the construction sector, “thanks to an expansion policy that led to the achievement and sale of projects.” In turn, he pointed out that as of today over 35,000 homes are on offer throughout the country, which represents 82% of the total that is being built.
He also explained that there is a lot of interest in the sector to address the challenges of the climate of uncertainty that the world is experiencing as a result of the war between Russia and Ukraine, which affects, among other things, the price of imported inputs for the sector.
Governor Valdez Albizu stated that construction, which had a growth of 6.3% for the period January-March 2022, has always been a priority sector for the country, especially due to job creation and its impact on the growth of the economy. .
He recalled that the BCRD placed RD$215,000 million through commercial banks, under conditions of an interest rate of 3% for banks, with the guarantee of titles issued by the BCRD and by the Ministry of Finance, an unprecedented measure in the other central banks of Latin America. Thanks to this, he said, they were able to make over 93,000 loans, which the productive sectors, households and MSMEs could use to preserve their activities, without forgetting the boost it gave to the construction sector.
This behavior made it possible for the Dominican economy to recover faster than expected, with a notable growth of 12.3% for the year 2021, equivalent to an expansion of 4.7% compared to the real production level of the year 2019, prior to the pandemic. The good performance has been maintained in the first quarter of this year with an accumulated growth of 6.1%, with a projection, according to the International Monetary Fund (IMF), of a growth of 5.5% by 2022, positioning it as the third largest economy in the world. higher increase at the end of the year.
The governor stressed that the economic relaunch was also favored by the vaccination campaign coordinated by the Vice President of the Government, Raquel Peña, and the improvement in the numbers of visits in tourism, remittances, free zones and foreign direct investment (FDI). , among other sectors.
Change in monetary policy
Valdez Albizu explained that, contrary to that expansionary monetary policy necessary at the time to mitigate the adverse effects of the COVID-19 crisis on companies and households, it is now time to implement a monetary normalization policy that contributes to balancing production with real demand, with the purpose of counteracting inflationary pressures of external origin. In that sense, he said that since November 2021 the Central Bank has been gradually raising the Monetary Policy Rate to 5.50% per year, after an accumulated increase of 250 basis points, consistent with what has been done in advanced economies and in other countries. from Latin America.
The governor highlighted the increases in monetary policy interest rates since 2021 in countries in the region such as Brazil (1,075 basis points), Argentina (900 basis points), Chile (775 basis points), Paraguay (600 basis points), Colombia (425 basis points), Peru (425 basis points), Uruguay (400 basis points), Costa Rica (325 basis points), Mexico (225 basis points), and Nicaragua (50 basis points). Likewise, the central banks of developed economies have also increased their reference rates since the beginning of this year to face the inflationary problem, as is the case of the United Kingdom (90 basic points), the United States (75 basic points), Canada (75 basis points), among others.
He said that at the spring meeting of the Western Hemisphere of the International Monetary Fund (IMF), held recently in Washington, which he attended as one of the members of the board of directors, the context of the current crisis was already addressed, in what the governor called ‘a perfect storm upon another perfect storm’, referring to the succession after the pandemic and the war in Ukraine. This scenario of high uncertainty was exacerbated by the increase in container transport prices and the rise in commodities, especially fuels and food supplies, such as wheat, soybeans, sorghum and corn.
He assured that the Central Bank will continue to monitor these external pressures in order to continue adopting the necessary measures in a timely manner to facilitate the gradual convergence of inflation to the target range; as well as preserve the relative stability of the exchange rate and contribute to maintaining favorable conditions for investment and production.
During the meeting, the governor was accompanied by the manager, Ervin Novas Bello; the deputy general manager, Frank Montaño; the economic adviser of the Government, Julio Andújar Scheker; the deputy manager of Regulation and Financial Stability, Ramón A. Rosario; and the director of the Financial Regulation and Stability department; Maximo Rodriguez.
ACOPROVI’s representation was made up of its president, Jorge Montalvo; First Vice President, Erik Bueno Tejada; second vice president, Annerys Melendez; third vice president, Julisa Burgos; Vice President Treasurer, Guido Rosario; first vocal, Santiago Colomé; advisor, Fermín Acosta; also counting on the presence of Dino Campagna, director of the Dominican Chamber of Construction (CADOCON).