Overview

Over the last two decades, the Dominican Republic have been standing out as one of the fastest economies in the Americas - with an average real GDP growth rate of 5.4% between 1992 and 2014. The DR remains the most rapid economy in the region in 2014 and 2015, with a GDP hovering at 7 percent. Recent growth has been driven by construction, manufacturing and tourism. On the demand side, private consumption has recently been strong, as a result of low inflation (under 1% on average in 2015), job creation, as well as high level of remittances.

Despite its strong growth and macroeconomic stability, the country has not witnessed significant welfare improvements, until very recently. Poverty soared from 32 percent in 2000 to almost 50 percent in 2004 following the 2003 financial and economic crisis, before gradually declining to 41 percent in 2013 and falling sharply in the last two years towards rates prevailing in 2000.

According to the World Bank Group’s Doing Business 2016, the Dominican Republic continues to be among the top 15 economies on the ease of doing business index in LAC. In recent decades, the country has also transformed its economic base and has diversified its exports. Improvements to the business climate have facilitated international trade and boosted export growth. However, further reforms are needed to maintain the country’s competitiveness in the region and beyond.

Challenges for inclusive growth

The Dominican Republic will hold presidential and congressional elections simultaneously in May 2016. The new government will have opportunities to:

Improve the investment climate to boost job creation: Traditional job-intensive sectors such as manufacturing have grown at a slower pace in recent years than, for example, telecommunications and mining, which tend to generate fewer jobs.  Since 2000, a large share of the jobs created has been in low-skilled and lower productivity industries in the informal sector. As a result of the 2003 crisis, real wages declined by 27 percent compared to 2000 and they have not recovered, even as labor productivity has risen significantly in the leading growth sectors. Improving competitiveness and the investment climate, ensuring stronger backward linkages from tourism and export processing zones to domestic manufacturing and agriculture, strengthening the quality of education and implementing job training policies, could help create more and better jobs.

Promote equitable, efficient, transparent and sustainable fiscal policy: Important steps have been taken to strengthen fiscal transparency and debt management since 2013. The ratio of revenue over GDP (under 14%, on average, for the least 4 years) is one of the lowest in the LAC region, and the tax system relies heavily on indirect taxes, which tend to be less progressive. On the expenditure side, key challenges include ensuring adequate financing for basic public services such as water and sanitation, quality education and health.  Reorienting budget allocations towards achieving quality results and strengthening public financial management systems, remain core priorities for an efficient and transparent fiscal policy.

Improve public service delivery to reach people living in poverty:  The DR has taken important measures in recent years to expand the coverage of social safety nets, improve targeting and condition transfers and enhance education and health.  Coverage has also expanded significantly in terms of key services such as the National Health Service and essential medicines. A particularly important effort has been the assignment of a budget equivalent to 4 percent of GDP to pre-tertiary education (up from 2.3 percent in 2012) that has allowed the construction of thousands of classrooms to reduce overcrowding and allow for fuller schooldays and therefore more learning.

At the same time, access to basic public services remains unequal and is of generally low quality, particularly for people living in poverty. Better program targeting, monitoring and evaluation, and capacity building, along with incentives such as results-based financing, could help improve service delivery.

Last Updated: Mar 30, 2016

The World Bank Group’s Country Partnership Strategy for 2015-2018 seeks to support the Government’s efforts to make growth sustainable and more inclusive, by expanding economic and social opportunities to all Dominicans.

The strategy offers a new US$550 million World Bank lending program and approximately US$200 million on the part of the International Finance Corporation (IFC), as well as guarantees from the Multilateral Investment Guarantee Agency (MIGA) in response to market demand. In addition, it offers advisory and other services on the part of the entire World Bank Group. With this comprehensive program, the World Bank Group hopes to achieve results in five key areas over the next four years:

  • Improve the investment climate and foster private sector development by reducing the time required to register new enterprises by half; promote access to financing for more than 60,000 small and medium-sized enterprises; and partner with the private sector through IFC and MIGA.
  • Increase access to electricity, telecommunications and other infrastructure services by reducing losses in the electricity sector and increasing investment in renewable energies..
  • Building resilience to external shocks by improving disaster risk management planning, developing a national integrated information system, installing a new telemetry network to manage water resource flows, and rehabilitating four dams.
  • Promote equitable, efficient, transparent and sustainable public resource management by strengthening fiscal management, better aligning actual expenditures with approved budgets and enhancing civil society capacity in budget analysis and oversight.
  • Improve access to social protection for 1.3 million Dominicans, including health, water and better housing by strengthening the targeting program, Progresando con Solidaridad; improving the quality of education; doubling the number of children immunized in three regions of the country; and ensuring access to improved sanitation for low-income households in Puerto Plata.

In the Dominican Republic, the World Bank’s portfolio has commitments of US$478.94 million whereas the IFC’s portfolio totals US$188 million, including mobilizations from IFC partners for US$22 million.

This IFC support to the private sector is complemented by a MIGA guarantee of US$107.6 million to support foreign investment in the country’s road infrastructure.  

Last Updated: Mar 30, 2016

Important results have been achieved in recent years in government projects financed by the World Bank Group.  These include:

1. Competitiveness and Investment Climate

  • The Dominican Republic is among the 50 economies of the world where trading across borders is easiest and the cities of Santo Domingo and Santiago ranked third and fifth in the ease of starting a business out of 22 cities analyzed in 6 countries of Central America and the Dominican Republic.
  • Through the Caribbean Growth Forum, the country has launched several initiatives for public-private dialogue to improve competitiveness and the country’s business environment.
  • The DR has passed an insolvency law that will facilitate quicker and less costly commercial restructuring.
  • The issuance of the IFC’s “Taino Bond” and on-lending of proceeds to local banks led to the availability, for the first time, of five-year, fixed rate mortgages for low-income households.

2. Broader Access to Improved Infrastructure

  • Rehabilitation of 520 Km of electric lines, reducing electricity losses and guaranteeing 24-hour service to 105,000 poor clients in rehabilitated circuits.
  • Extension of the runway at the Punta Cana airport with IFC support contributing to a substantial increase in tourist inflows.

3. Preparedness for Disaster and Climate Change

  • Rehabilitation of two major dams after storms Olga and Noel, and repair of 152 Km of transmission lines in four extremely poor provinces.
  • Rehabilitation of 11,500 hectares of irrigated lands, enabling an increase in agricultural production.
  • Enhanced telemetry systems to measure river water flows.

4. Public Expenditure Quality and the Creation of Alliances for Reform

  • Five municipalities drafted development and institutional action plans, and received training in participatory budget planning, financial administration, municipal services and procurements. These activities are well advanced in other 20 municipalities, as is the roll-out of an Integrated Financial Management System for Municipalities.
  • The audit and oversight capacity of the DR Supreme Audit Institution (SAI), the Chamber of Accounts, was strengthened.
  • The Participatory Anti-Corruption Initiative (IPAC), which  prioritizes anti-corruption reforms and strengthens accountability, helped the government save  more than US$20 million annually  in procurement of medicines and enhanced transparency and accountability via the Government Budget Transparency Portal.
  • The Dominican Republic was accepted this year as a candidate in the Extractive Industries Transparency Initiative.
  • Support to Government Quality of Education Initiative (IDEC) to strengthen the quality of education and to the broad based Electricity and Education Pact.
  • A  Citizen Observatory was established to oversee government budget spending.

5. Social services

  • More than 250,000 undocumented Dominicans have obtained identity documents.
  • 38,000 vulnerable youth have been trained to increase their employability, and more than 4,000 structurally unemployed Dominicans took part in temporary job programs combined with life skills training in extremely poor communities to support their reintegration into the labor force.
  • Support to transparency in the national public system for procurement and distribution of medicines in public hospitals, which helped cut costs of medicines, such as antibiotics and insulin.
  • Rollout of a competitive selection system for teachers to raise the academic standards of newly recruited teachers, and lead to better quality education for students. 

Last Updated: Mar 30, 2016


LENDING

Dominican Republic: Commitments by Fiscal Year (in millions of dollars)*

*Amounts include IBRD and IDA commitments