The DR economy has enjoyed one of the fastest growth rates in the hemisphere with a compound annual growth rate of 6% between 1997 and 2007 (source: Central Bank of the DR). The economy benefits from its geographical proximity to the United States and is the fourth largest trading partner of the US in the Latin American and Caribbean region behind Mexico, Brazil and Venezuela.
Although the country has long been viewed primarily as an exporter of sugar, coffee and tobacco, the service sector has overtaken agriculture as the economy's largest employer due to growth in tourism and free trade zones. Agriculture now represents just 7.7% of GDP; industry 28.5%; and services 51.9% (source: 2007 Report on the Dominican Economy, Central Bank of the DR). Today tourism is the country's primary industry and a major source of hard currency - in 2007 a total of 3.9 million visitors generated more than US$4 billion.
In 2003 the country was temporarily affected by reduced tourism, a brief banking crisis, and limited growth in the US economy. The banking crisis proved to be a catalyst for much-needed reform, heralding both a change of government and an intolerance of corruption. The policies implemented by the newly elected President, Leonel Fernandez, delivered belt-tightening reforms. Among them, the modifications to the tax regime have proven to be very successful. Fernandez’ re-election in 2008 provides the assurance of continued implementation of these and other important policies. To date the economy has enjoyed a stable growth trajectory and a full recovery from the currency crisis.
Furthermore, implementation of the Central American Free Trade Agreement (CAFTA-DR) between the Dominican Republic, the US and Central America was a significant milestone, opening up a market of 44 million consumers. With the negotiation of the Economic Partnership Association (EPA) with the member states of CARIFORUM and the European Union as well as the Free Trade Agreement with Canada, the country continues to strengthen and diversify its trade relations.
These fundamentals continue to be the cornerstone of the government’s development programme. This is being managed against the background of the global economic downturn experienced in 2008, particularly in the banking and commodities sectors. Despite these challenges, the local financial community continues to be relatively robust, thanks to the disciplined regulatory regime imposed by the Central Bank in recent years. Also, while the Dominican Republic relies on certain commodities such as sugar, coffee and tobacco for export earnings, the country also is dependent on major commodity imports such as oil and metals, whose prices have fallen dramatically over recent months as the world economy faces the threat of recession for the first time in a number of years. This has had a substantive compensatory effect on falling price trends for the country’s principal exports. Overall the economic programme has provided a stable platform for future growth. The economic dynamism in the Dominican Republic remains positive, resulting in a 7.5% growth in GDP for the first semester of 2008 (source: Banco Central de la República Dominicana), and capital continues to find its way to the country.
The current administration under President Fernandez enjoys one of the highest approval ratings in Latin America, thrusting the Dominican Republic on to a different stage - one where the country's key fundamentals compare favourably against similar economies in other emerging markets.
