For the past two decades, the Dominican Republic (DR) has been one of the fastest growing economies in the Latin America and Caribbean Region, with GDP growth averaging around 5.4 percent annually between 1992 and 2014. Despite this exceptional performance, poverty remains higher today than in 2000. 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. More recent data point to a decline to 35.8 percent of GDP in 2014.
According to the World Bank Group’s Doing Business 2015, the Dominican Republic along with Jamaica and Trinidad and Tobago featured among the countries that implemented the most reforms in Latin America last year, making it easier for entrepreneurs to do business by reducing the number of documents required to export and import, strengthening minority investor protection by introducing greater shareholder rights and requirements for greater corporate transparency, and improving its credit information system by enacting a new law regulating the protection of personal data and the operation of credit reporting institutions.
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 its competitiveness in the region and beyond.
Challenges for inclusive growth
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, and 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 debt management and to contain deficits since 2013, with a view to maintaining the debt/GDP ratio (48.5 percent of GDP in 2014) within sustainable levels. On the revenue side, current tax system is hampered by relatively low revenue collection in relation to GDP (14 percent) and by a heavy reliance on indirect taxes, which tend to be regressive. At the same time, tax exemptions for a range of purposes exceed 6.7 percent of GDP. Revising tax exemptions while protecting the poor would help enhance revenue collection to finance essential services andpromote social inclusion. 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 on actions that 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. For example, the DR has a very high share of births attended by health professionals but maternal and infant mortality rates remain well above regional averages. Educational outcomes also remain well below regional averages. Better program targeting, monitoring and evaluation, and capacity building, along with incentives such as results-based financing, could help improve service delivery.
Last Updated: Sep 08, 2015