The Dominican Republic is projected to have the highest economic growth in Latin America for 2018, a title achieved in the past several years for this Caribbean country of about 30 thousand square miles.
BBC Mundo, in a very well-written and researched article posted on September the 12th, recognized the economic leadership of the DR.
“It is known for its beautiful beaches and the millions of tourists who come to vacation every year. But what you may not know is that the Dominican Republic has six years with an average economic growth close to 6% per year,” starts off the article that cites local entities and international institutions like the World Bank and the IMF.
In 2017 the GDP growth top at 4.6% and based on the Economic Commision for Latin America and the Caribbean (Cepal), for 2018 it is expected to reach 5.4%, as mentioned in the research.
Meanwhile, the IMF projects a 5,5%. The World Bank stays at 5%, according to data published on their June reports.
But, how did the Dominican Republic achieved the highest economic growth in 2018?
For the most part, Tourism.
As cited on BBC Mundo: “Currently the main source of income for the Dominican Republic is tourism,” explains Rafael Espinal, coordinator of the School of Economics at the Technological Institute of Santo Domingo (INTEC).
Espinal was amazed that the quantity of tourist (almost 7 million), is on its way to matching the population at 10 million.
At the XXXII Commercial Exhibition of the Association of Hotels and Tourism in the Dominican Republic, Asonahores, its president Joel Santos published a recent study of the tourism sector bill in the Dominican economy, which represents:
- Transportation – 19%
- Other services – 19%
- Construction – 12%
- Trade – 10%
- Real State – 8%
- Other manufacturers – 7%
- Beverages and Tobacco – 5%
- Finance – 5% of the financial sector
- Electricity, water, and gas – 4% of electricity
- Livestock – 2%
Moreover, the Minister of Tourism of the Dominican Republic, Francisco Javier Garcia, published an article on a local newspaper in which he praised the benefits of tourism to the country.
“Tourism is one of the most important activities for the macroeconomic stability of the Dominican Republic. The sector has become one of the main generators of direct and indirect jobs, the largest generator of foreign currency and direct foreign investment and currently, the Dominican Republic is the undisputed leader of the Central America and Caribbean region,” opens up the minister on the August 28th printed version of Listin Diario.
Free Trade Zones
BBC Mundo calls it the “Dominican formula”, and aside tourism, the highest economic growth in the region owes it to direct foreign investment.
In our free zones, the foreign companies do not pay taxes, allowing the expansion of textile exports, parts of electrical products and medical equipment.
Recently, the director of the National Council of Free Trade Zones, Luisa Fernández Durán, explained that the Dominican Republic has 690 free zone companies, with exports of 5.9 billion dollars that represent 56% of the sector in the country.
It holds 165,000 direct and 300,000 indirect jobs.
As the third economic force, it points out the remittances of the Dominican diaspora abroad, mostly from the United States and European countries.
From 2010 to last year, the sum of remittances sent to the country has increased by 60.52%, from 3,682.9 million to 5,911.8 million, for an absolute difference of 2,228.9 million dollars, according to data provided by the Central Bank of the Dominican Republic.
When comparing the remittances received during the first semester of this year with the same period of 2017, an increase of 10.56% is observed, which represents a net increase of 307.4 million.
The United States leads the list of countries that send remittances, where the majority of the Dominicans living abroad reside.
From January to June of 2018, Dominicans living in the U.S. sent their relatives 2,480.3 million, which represents 77.13% of the total remittances.
The prestigious English publisher also noted a challenge that the country needs to address in order to improve: reduce poverty.
BBC Mundo states that “until now, the country keeps inflation under control (4.2%) and unemployment is at 5.5%, although many of the jobs generate insufficient income for Dominican families.”
According to the World Bank, “the poverty rate decreased from 30.8 percent in 2015 to 28.9 percent in 2016, according to official estimates. It is expected to continue to decline at a slower pace than in previous years as GDP growth approaches the medium-term growth potential of the country.”
“The challenge we have so that those vulnerable do not become poor again, we have to prepare ourselves to design public policies to support this sector that has stopped being poor but still does not finish consolidating to be middle class. That is the challenge we have and that is why they are all these programs that we developed from the Presidency of the Republic, “said Dominican President Danilo Medina last February.