Over the past two decades, the Dominican Republic has been one of the fastest growing economies in the region. This was due to a combination of market-oriented structural reforms in the early 1990s and favorable external conditions that supported economic growth. Furthermore, prudent monetary and fiscal policies contributed to macroeconomic stability.
However, the drivers of this exceptional growth are reaching their limit due to low productivity growth in recent years, hampered by insufficient human capital to meet the needs of the business sector, the occurrence of disasters related to climate change and distortions in key markets, including the inefficient allocation of tax exemptions.
By 2023, growth in the country is expected to slow from 4.9 percent in 2022 to 3.1 percent and the upper-middle-income poverty rate ($6.85 PPP per day 2017) is estimated at 21 percent, down from 23 percent in 2020, but above pre-pandemic levels.
Despite the growth, several sectors have failed to generate quality jobs, and the high inflation observed in 2022 (8.8% y/y) affected the livelihoods of the population, mainly the most vulnerable. Consequently, it is necessary to improve access to quality basic goods and services – in education, health, water and electricity – that help expand economic opportunities, increase economic mobility and protect vulnerable sectors.
The Government has shown a strong commitment to address the long-standing challenges posed by the electricity sector through a comprehensive reform package, but challenges remain such as: (i) expanding transparency, accountability and efficiency in the sector; (ii) continuing with the diversification of the energy matrix, including less polluting energy sources; and (iii) increasing access to reliable and affordable energy. Improving the environment will also be key to supporting the competitive development of investments in renewable energy led by the private sector.
More than 40 percent of Dominicans live in vulnerable conditions and are at risk of falling into poverty due to climate-related impacts and economic crises. Climate change has intensified exposure to natural disasters, which could increase contingent fiscal liabilities, given the country's low degree of financial protection against these risks. The occurrence of adverse events increasingly highlights the critical need for accelerated action that strengthens the country's resilience and adaptation in an inclusive manner.
Likewise, gender gaps in jobs and wages, shorter working lives and higher unemployment and unpaid roles contribute to a higher incidence of poverty among women.
Looking to the future and to have inclusive growth, the Dominican Republic will require a greater increase in productivity, through the implementation of reforms to strengthen human capital, competitiveness, innovation, efficiency in public spending and resilience against climatic events.
Last Updated: Oct 04, 2023
