Dominican Republic Leads Caribbean Economies

The Dominican Republic's economy is outperforming those of its neighbors.

The economy of the Dominican Republic is set to surpass its regional neighbors this year, notching the highest growth in the Caribbean region. The DR has been gaining attention for its ability to maintain steady robust economic growth. In 2018, GDP rose by 7%, and the latest report by the country’s central bank says all industries are expanding—and that its free-trade zones in particular are drawing investment.

According to the International Monetary Fund, GDP in Central America, Panama and the DR will expand by 3.8% in 2019 and 4% in 2020, up from 3.7% in 2018. So far, the regional group’s top performer has been Panama, but the Dominicans are stepping up the pace.

Both Panama and the DR are expected to continue growing faster than their neighbors, but on very different developmental tracks. Panama, whose eponymous canal has linked its growth to international trade, now sees its destiny as a financial hub.

The DR, in contrast, “is more oriented around tourism, manufacturing and mining,” says Lee Sutton, a country risk analyst with Fitch Solutions. According to recent estimates, its GDP should add another 5% this year, less than the 7% of 2018 but still well above the rest of the area. Its recipe has been infrastructure investments for tourism with a focus on affordable midmarket, high-quality structures. “The construction industry has benefited from an influx of foreign investment to add capacity in the tourism sector,” Sutton says.

The main problems for businesses in the DR stem from a wobbly electricity supply, plagued by frequent blackouts and theft. The proposed sale of 50% of the Punta Catalina power plant could provide an injection of cash into public coffers.

Panama’s GDP per capita, at almost $16,000 per year, is one of highest in Latin America; and the DR is hoping to follow suit. “Over the coming decade, we expect that Costa Rica and the Dominican Republic will see their GDP per capita increase and likely end up ranking among the highest in the broader region,” says Jesse Wheeler, senior country risk analyst at Fitch. “Elsewhere in the region, per capita output and income levels are much lower, with a prevalence of small, informal businesses and poor access to education limiting productivity and incomes.”