Balancing growth, inflation and external risks, amid geopolitical uncertainty

DOMINICAN REPUBLIC - Report 23 Mar 2026 by Magdalena Lizardo

Macroeconomic indicators as of February suggest that the Dominican economy is gradually recovering from its weak 2025 performance, when growth fell to one of its lowest levels of the past three decades.

Economic activity expanded by 3.5% y/y in January 2026, while inflation eased to 4.67% y/y in February, moving closer to the Central Bank’s 4% target. External accounts remained supportive, with goods exports rising 21.6% y/y; imports contracting by 3.2% y/y; and tourism revenues increasing by an estimated 22.4% y/y. The peso appreciated slightly against the dollar, by 0.16% y/y in February, while international reserves rose to $16.2 billion.

Financial conditions have gradually eased. The average lending rate declined to 13.27% in February — its lowest level since July 2023 — although credit growth remains subdued at 8.2% y/y, its slowest pace since August 2021, suggesting a still-gradual recovery in domestic demand.

Cumulative revenues through February grew by 8.8% y/y, while expenditures increased by 13.8% y/y. Authorities have sought to contain current spending (excluding interest payments) to preserve fiscal space for higher capital expenditure.

Policy discussions until the February 28 outbreak of the U.S.-Israel conflict with Iran focused on strengthening economic momentum and addressing structural challenges, including electricity system vulnerabilities highlighted by the recent nationwide blackout. The escalation of geopolitical tensions has since altered the policy landscape, shifting Dominican government priorities toward mitigating the effects of higher oil prices, and global uncertainty over macroeconomic stability and household purchasing power.

Monetary and fiscal authorities therefore face a familiar supply-shock dilemma: with economic growth still modest, and inflationary pressures persisting, policies addressing one challenge may risk aggravating the other. Oil markets remain a key source of uncertainty for the Dominican economy, and geopolitical tensions may shape the economic outlook in coming months.

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