North & Central America and Caribbean

Dominican Republic
Last reviewed: 12 August 2009

Country information

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ECONOMY

GDP: purchasing power parity - $77.43 billion (2008 est.)
Per Capita GDP: purchasing power parity - $8,100 (2008 est.)
Annual Growth: 8.5% GDP growth in 2007, 5.3% GDP growth in 2008.
Major Industries: (Industry = 17% of GDP). Sugar refining, pharmaceuticals, cement, ferronickel and gold mining, light manufacturing, construction, services (including offshore assembly operations, especially textiles), tourism and transportation
Mining Products: Nickel, Gold and Silver
Agricultural Products: Sugar, coffee, cocoa, bananas, tobacco, rice, plantains, beef, cotton, beans, potatoes, corn, pigs, dairy products, eggs and flowers
Trade: Exports ($6.94 billion 2008 est.): commodities - ferronickel, sugar, gold, silver, coffee, cocoa, tobacco, meats. Imports ($13.56 billion, 2008 est.): foodstuffs, petroleum, cotton and fabrics, chemicals and pharmaceuticals.

The Dominican Republic is a middle-income developing country primarily dependent on agriculture, trade and services, especially tourism (which is the largest earner of foreign exchange). Although the service sector has taken over from agriculture as the leading employer of Dominicans (due principally to growth in tourism and the Free Trade Zones), agriculture remains the most important sector in terms of domestic consumption and is second place (behind mining) in terms of export earnings. Tourism accounts for more than $1 billion in annual earnings. Free Trade Zone earnings and tourism are the fastest growing export sectors. Remittances from Dominicans living in the United States are estimated to be about $1.5 billion per year.

Following the economic turmoil from the late 1980s to 1990, during which GDP fell by up to 5% and consumer price inflation reached an unprecedented 100%, the Dominican Republic entered a period of moderate growth and declining inflation, which lowered to 2.7 % in 1993, the lowest in 16 years.

In the period from 1996-2000, the DR showed a very impressive economic growth rate running at an average of 7.8% annual GDP growth - the highest in all of Latin America and the Caribbean. The effects of Hurricane Georges in 1998 (damage to the infrastructure and to agriculture) had fewer repercussions for GDP growth than originally anticipated.

Economic activity is skewed towards 3 principal sectors; tourism, the free zones and agriculture. The Industrial Free Trade Zones offer attractive incentives for foreign investment in areas such as textiles and electronics. The DR has a low cost and capable labour pool that has proved receptive to adopting new manufacturing skills. The economic performance has been amongst the strongest in Latin America and the Caribbean in recent years. The collapse of one of the Dominican Republic’s major banking groups Banco Intercontinental (Baninter), in May 2003 threw the economy into turmoil. Losses were put at around US$2 billion – equivalent to 15% of the country's gross domestic product or 80% of the government's 2003 budget.

As a result of the Baninter crisis, the previous PRD government agreed to a Stand-By Agreement with the IMF, but this went off track on 2 occasions, for the second time in February 2004. In his acceptance speech on 16 August 2004, President Fernandez identified getting back on track with the IMF as the number one priority for the country. A letter of intent was signed on 31 January 2005 releasing the first tranche of budgetary support which amounted to $695.1 million over 28 months or $437.8 million in Special Drawing Rights. The agreement was extended on 30 January 2007.

On January 2008 the International Monetary Fund finished its eighth and final review of the Stand-by arrangement with the DR. As a result, the IMF approved the disbursal of US$122.3 million, of which $77.05 million were in Special Drawing Rights.

At the beginning of September 2005 the DR ratified a Free Trade Agreement (DR/CAFTA) with the US and the Central American countries. The Dominican Republic implemented the agreement on 1 March 2007. The primary objective is to enhance 2-way trade between the DR, the Central American countries and the US, abolishing trade restrictions, easing frontier barriers for merchandise, and promoting fair trade in a duty free zone. Investment opportunities are another major element of the FTA, which includes multiple guarantees and incentives for foreign investors. In December 2007 the Caribbean and European negotiating teams concluded the first Economic Partnership Agreement (EPA) which was signed in October 2008. The new agreement replaced the Cotonou Agreement that expired at the end of 2007 and continues to provide preferential treatment for the CARICOM countries and the DR.

As of January 2009, all exports in goods and services originating from within the Cariforum countries (CARICOM plus DR) receive duty-free and quota-free access in Europe.The DR is a major recipient of aid from international organisations such as the World Bank, Inter American Development Bank and the EU through Cotonou Agreement funds.