Economy

Dominican Republic: 2024 Economic Overview

The Dominican Republic will hold elections in May, with incumbent Luis Abinader expected to be re-elected to continue his economic reform agenda.

Image credit: Shutterstock / ooo.photography

2024 in the Dominican Republic will be marked by national elections in May.

Citizens will be asked to choose the country’s president for a term lasting until 2028, which may put some investment on hold pending the results.

At the point of writing, it appears that President Luis Abinader will win re-election in the first round of the elections, as he could surpass the threshold of 50% + 1 of the votes needed to make a second-round runoff unnecessary.

He is on course to obtain 54% of the votes in the first round, according to a February poll by local firm Acxiona.

Abinader, President since August 2020, has prioritized economic reforms focused on improving fiscal responsibility, reducing corruption, and attracting foreign investment.

Proof of these efforts is the extension from 2030 to 2060 of the concession contract with Vinci Aeropuertos to manage six airports, including Las Americas International Airport, the main arrival route for the 10.3 million tourists that the country received in 2023.

Or the fact that the International Monetary Fund (IMF) considers that reforms have strengthened the country’s macroeconomic frameworks, resulting in per capita income more than doubling, and a 50% reduction in poverty rates, according to a May 2023 press release.

The Dominican Republic is experiencing remarkable convergence in per capita income with the US, according to another IMF press release issued in August 2023.

In that document, the IMF estimates that the country’s per capita income is 32% of that of the United States, higher than the average standard of living in Latin America, which is one-quarter that of the United States.

“With the right policies, the country has the potential to become an advanced economy in the next 40 years,” according to the report.

Seeking to continue moving in that direction, Abinader has promised to seek a national unity agreement to complete the reforms the country needs, should he win the elections.

Reforms will play a fundamental role in boosting the country’s growth, according to the World Bank.

However, the entity stresses that for this growth to be inclusive, it is necessary to seek an increase in productivity through measures that strengthen human capital, competitiveness, public spending, and resilience to climate events.

More than 40% of the country’s citizens live in vulnerable conditions and are at risk of falling into poverty due to the effects of climate change and economic crises, according to the World Bank.

As part of the strategies for responding to this problem, the Abinader administration has committed to increasing renewable energy to 25% of the country’s energy mix by 2025.

Foreign investment is key to achieving this goal, and in the last year companies such as MPC Energy Solutions, AES Corp., and InterEnergy have announced solar and renewable projects in the Dominican Republic.

The country is also encouraging the development of these projects through concessions and public-private partnerships, while from the private sector more and more companies are seeking power purchase agreements with independent power producers.

In 2022, the country reached a record USD3.96 billion in foreign direct investment (FDI), according to World Bank data.

Most of the FDI goes to the tourism sector, but the second largest recipient is the renewable energy sector.

Other sectors showing growing attractiveness are logistics and manufacturing, reflecting the Dominican Republic’s efforts to diversify its economy, according to data from ProDominicana, the country’s FDI attraction agency.

SMEs are the country’s largest employers, accounting for 98% of the country’s businesses.

In an attempt to also make them part of economic development, the government utilizes Promipyme, an entity which provides loans to small businesses, while encouraging SMEs to become part of the country’s free trade zones.

Free trade zones accounted for 57.6% of total Dominican exports in 2021, according to data from the Spanish Institute for Foreign Trade (ICEX).

The inclusion of SMEs in these sites implies the possibility of accessing knowledge transfer through collaboration with large companies based in these zones.

Another challenge to be addressed through reforms is to increase government transparency and accountability, according to the World Bank.

To advance that commitment, the country’s comptroller last year published audits of 18 government agencies that include findings to improve administrative processes.

These findings are being taken into account to seek greater efficiency in the public sector, Homero Figueroa, spokesman for the Presidency, said in June 2023.

For this year, the country’s Ministry of Economy expects 5% growth.

The ministry’s growth projection for 2023 is 2.5%, while in 2022 it grew by 4.9%, according to World Bank estimates.

The 2024 economic outlook is positive for the country, especially for the second half of the year after the conclusion of the elections.

The question is whether it will continue on the path of long-term reforms to make further progress in improving per capita income and reducing the current high levels of poverty.

As of early 2024, all indications are that this trend will continue.

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