Dominican Republic has highest gross national savings in Latin America

The gross national savings of the Dominican Republic leads as the highest in Latin America among the countries with the highest savings rate since it is equivalent to 27.8% of the Gross Domestic Product (GDP), according to the Superintendency of Banks (SB).

This indicator understood as the sum of private and public savings, surpassed the average of Latin American and Caribbean countries, which is 19.8% of GDP, as of December 2021.

The Dominican Republic is followed by Mexico (25%), Nicaragua (22.9%), Argentina (21.9%), Chile (20.3%), and Guatemala (20.2%).

Below the Latin American average are El Salvador (17.1%), Brazil (17%), and Colombia (12.6%).

“The savings rate resumes to a significant growth path as of the first quarter of 2021,″ described the Superintendency.

HOUSEHOLDS AND COMPANIES

Dominicans held savings of DOP 2.2 billion (US$40 million) in the financial system as of June of this year.

According to the SB, the figures for the year’s first half represent a 13.2% inter-annual growth. They are also equivalent to 41.2% of the Dominican GDP.

“Its increase affirms the confidence in the financial system and the importance of national savings as one of the main engines of economic recovery after the crisis generated by the Covid-19 pandemic,″ stated the SB.

By type of service, 43.3% of the money was in savings accounts, 24% in time deposits, 17.9% in checking accounts, and 14.8% in other types.

The number of accounts in savings instruments was around 10.7 million as of June, a year-on-year increase of 4.7%, or 480,390 new openings in the last year.

Of the funds raised by the financial system, 54.92% came from households, with DOP 1.2 billion; 20.2% came from companies in the real sector, DOP 449 billion, and 27.4% – DOP 608 billion – from other agents in the economy.

Multiple banks accounted for 89.8% of total deposits, savings and loan associations for 8.4%, savings and loan banks for 1.5%, and other entities for 0.3%.

Deposits are the instruments used by financial intermediaries: savings accounts, checking accounts, time deposits, financial certificates, bonds, mortgage bonds, and others.

The metropolitan region and the eastern part of the country recorded the highest year-on-year growth, with increases of 15.7% and 16.1%, respectively.

The Metropolitan and Northern areas accounted for 89.8% of savings.

DOLLARS VERSUS DOMINICAN PESOS

Almost a third of the savings in the system are in foreign currency, 29.1%. Of these funds, 98.1% are in US dollars and only 1.9% in euros.

The Superintendency noted that savings in dollars and euros increased by 32.5% and 35% since March 2020, when the Covid-19 pandemic began.

Notwithstanding that increase, the foreign currency share remained stable around its fluctuation between 27% and 29% of the system’s total liabilities, except in June 2020, when the level reached 32%.

“This can be considered a sign of depositor confidence in the financial system’s resilience,” commented the Superintendency.

An analysis by the Regional Center for Sustainable Economic Strategies (CREES) found that the growth rate of foreign currency deposits has been declining since the second half of 2020.

The movement is explained by two factors: the increase in passive interest rates in local currency, which improves the attractiveness of savings in pesos, and the greater strength of the peso against the dollar.

“Between December 2021 and September 2022, the passive interest rate in pesos increased by six percentage points, and the peso appreciated by 6.4% against the dollar,” CREES indicated.

With information from Bloomberg