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Dominican Republic
Summary
Moody’s B1 / S&P BB- / Fitch BB-1
Economy: Agriculture 5%, Industry 33%, Services 62%
The Dominican Republic is a $71 billion economy that has grown at an average rate of 5.6% from
2006 to 2016, the second highest in Latin America after Panama. The economy is well diversified,
and manufacturing goods from export processing zones (EPZs), tourism, and remittances are the
country’s major sources of foreign currency. The United States is a major trade partner, and the
country also has a strong political and commercial relationship with Venezuela. President Danilo
Medina was reelected for another 4-year term in 2016 and continues to implement his fiscal reform
agenda, including important economic adjustments. The Dominican Republic’s main weakness is the
electricity sector, although the government is focusing on reaching an electricity pact with stakeholders. The relatively low level of reserves is another concern as it limits the country’s ability to defend its
currency, although this is counterbalanced by the country’s healthy banking system.
Economic Indicators
Population (Millions)
GDP per Capita (USD)
Nominal GDP (USD Billions)
2012
2013
2014
2015
2016F
9.7
9.8
9.9
10.0
10.1
2017F
10.2
6,252
6,264
6,482
6,733
7,083
7,394
60.5
61.3
64.1
67.2
71.5
75.4
Real GDP (%)
3.9
4.1
7.4
6.5
6.2
5.2
Year-End CPI (%)
3.9
3.9
1.6
2.3
1.6
3.5
Fiscal Balance (% of GDP)
-6.6
-3.6
-3.0
-0.2
-3.0
-3.1
Interest (% of Revenues)
17.4
15.9
16.7
17.5
17.0
16.9
FC Debt/Public Debt (%)
73.5
75.5
76.5
77.5
76.5
76.5
Government Debt (% of GDP)
30.5
34.6
34.4
34.9
35.8
36.7
223.9
237.7
228.4
196.3
245.2
253.9
Current Account (% of GDP)
-6.6
-4.1
-3.2
-2.1
-1.7
-2.0
FDI (% of GDP)
5.2
3.2
3.4
2.8
2.7
2.6
External Debt (% of GDP)
27.4
30.6
31.4
30.1
29.9
31.0
Foreign Reserves/External Debt (%)
21.5
25.0
24.1
26.0
25.5
24.1
Foreign Reserves (Mo. of imports)
2.1
2.9
2.9
3.2
3.1
3.1
Foreign Reserves (% of GDP)
5.9
7.7
7.6
7.8
7.6
7.5
Government Debt (% of Revenue)
As of November 2016
Forecasted or estimated results do not represent a promise or guarantee of future results and are subject
to change.
Source: IMF, Haver Analytics, Ministry of Finance, Central Bank, Lazard
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Rating History
Below is a history of the country’s foreign and local currency ratings by the major agencies
dating back to 2000. We have also included a chart of the country’s hard currency external
debt spread and the JP Morgan EMBI Global Diversified Index spread for comparison.
Rating History
Hard Currency
Local Currency
BB+
BBB+
BB
BBB
BBB+
BBB-
B
BB+
BCCC+
BB
CCC
BB-
2000
2008
Moody’s
2016
S&P
Fitch
CCC-
2000
2008
Moody’s
S&P
2016
Fitch
As of December 2016
Performance represents past performance. Past performance is not a reliable indicator of future results.
Source: Fitch, Moody’s, Standard and Poor’s, Bloomberg
Bond Spreads
2000
1600
1200
800
400
0
2008
2010
2012
Dominican Republic
2014
2016
EMBIGD
As of December 2016
Performance represents past performance. Past
performance is not a reliable indicator of future
results.
Source: JP Morgan
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Dominican Republic
Strengths
Well-Diversified Economy
From an external perspective, the pillars of economic growth are tourism, the maquila
sector, family remittances, and, more recently, gold exports. Domestically, construction is
an important driver of growth. As such, the Dominican Republic is relatively well diversified
and does not depend on any particular sector or industry. The industrial sector, including
EPZs, is the single-largest category, accounting for 25% of GDP, while in the service sector,
which accounts for slightly more than 60% of GDP, none of the subsectors has more than
10% participation.2 EPZs continue to be a major source of exports, accounting for 58%
of total 2015 exports. The country also benefits from gold exports from the Barrick Pueblo
Viejo mine, which began production in 2013 and generates gold exports amounting to more
than US$1 billion annually.3 The Dominican Republic is by far the top tourist destination in
the Caribbean and Central American region and boasts major facilities, including six major
airports, most of which have direct flights from the United States. Finally, family remittances
totaling US$4.9 billion, equivalent to more than 8.0% of GDP in 2015, are an important
source of growth.4 More than one-tenth of the Dominican Republic population, equivalent
to 1.4 million people, live abroad, mainly in the United States. They tend to send the bulk of
the family remittances.5 Both tourism and remittances performed quite well in 2016; tourist
arrivals from January through October 2016 were 4.9 million, compared to 4.5 million in the
same period in 2015.6
Key Partners
The Dominican Republic has succeeded in maintaining a good relationship with both the
United States and Venezuela. This strong relationship is not only reflected in trade, but also
in the form of other treaties, such as the free trade agreement with the United States that
was approved in 2005.7 The Dominican Republic has traditionally also had strong economic
ties with Venezuela, which provided subsidized oil through the PetroCaribe initiative; from
2005 to 2014 the Dominican Republic was the largest beneficiary of the program, receiving
90 million barrels of oil out of 307 million total barrels supplied to 13 PetroCaribe member
countries.8 The strong relationship also extends to politics; for instance, former President
Leonel Fernandez was one of the few electoral observers welcomed by the Venezuelan government for the December 2015 legislative elections.9 In addition, many wealthy Venezuelans
are moving to the Dominican Republic and making significant investments, estimated at
US$2 billion in 2014, in the retail, banking, and tourism sectors.10 One of the most highprofile projects will be a new Four Seasons hotel by the influential Cisneros Group, whose
chairman has adopted the Dominican nationality.11 Haiti has also been an important trade
partner recently, as it is the second-largest export destination after the United States, with
2015 exports valued at US$1.8 billion;12 although a significant portion of this consists of
intermediate textile products destined for Haiti’s EPZs. In contrast to relations with the
United States and Venezuela, relations with Haiti tend to be more tense, even as the two
countries develop economic ties.
Dynamic Economy
The Dominican Republic is one of the fastest growing economies in the Central American
and Caribbean region. From 2006 to 2016, the economy grew at an average rate of 5.6%
per year, only below Panama’s 7.4%.13 In the first nine months of 2016, the economy grew
by 6.9% and is expected to grow 6.2% in 2016, above the estimated potential rate of 5%.14
Economic performance has been influenced by the performance of the United States, its
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main trade partner and largest source of tourism. Therefore, gradual economic improvement
in the United States is likely to have a positive impact on the three external pillars of the
economy: tourism, maquila exports, and family remittances.
Continued Structural Reforms and Better
Macroeconomic Stability
The country has undergone a series of structural reforms that are positive for the economy
over the longer term. On the fiscal side, President Medina introduced changes to the tax
code and government spending that could eventually lead to a more sustainable economy.
Partially as a result of tax reforms (better collection, formalization of informal economy, etc.)
and other measures, the budget deficit has declined to a more sustainable level of 3% GDP.
Another positive is that since 2012, the Central Bank has introduced an inflation-targeting
regime that has set a target of 4% ±1% in 2016. Inflation has declined and remains well contained, with October 2016 year-over-year inflation of only 0.9%, below the lower inflation
target. President Medina was also reelected for another term in May 2016, and the main challenges for him are to ensure he delivers on an electricity pact that will address structural issues
in the electricity sector, as well as a fiscal pact aimed at ensuring sustainable performance.
Solid Banking System
The Dominican Republic’s banking system is relatively solid, and it is in a much better position than during its financial crisis in 2003–2004. The banking system’s management is more
cautious, while regulation and supervision are much better than in the past. The banking
system’s balance sheet is relatively strong. Deposits have steadily grown for the past couple of
years, and credit has also grown at a moderate pace. Reforms have strengthened the banking
and financial sectors with better regulatory oversight. The banking system is healthy, and
the consolidation of two of the largest banks (BHD and Leon) in December 2013 further
strengthened the sector, although it also resulted in a concentration of market power; as of
September 2016, the three largest banks accounted for 78% of banking assets.15 Equally positive, interest rates have been stable, and the level of non-performing loans is not a cause for
concern; as of October 2016 NPLs only amounted to 1.8% of assets.16
Weaknesses
Electricity Sector Problems
For all the positive reforms that the country has undertaken, a major bottleneck for further
economic growth remains the electricity sector. For more than two decades, the government
has made many reforms and changes but has failed to resolve the major issues. The generation
sector, managed by the private sector, is profitable and relatively well managed despite late
payments from the distribution companies. The primary challenges stem from distribution
and transmission, which are largely under the control of the public sector. Among the main
problems with the distribution and transmission sectors are electricity sale prices below
market levels; low billing collection rates; theft due to unsecured access to equipment; inefficient operation; and very old or missing meters, cables, transformers, and overhead lines.
The government continues to make progress, such as reducing losses from around 40% to
around 33%, but electricity losses remain among the highest in the world.17 The World Bank
continues to provide support for the modernization of the distribution grid in order to reduce
electricity loss, and it approved a US$120 million loan in December 2015.18 In addition to
the obvious effect on GDP when the country experiences blackouts, 40% of all thermoelectric plants, which supply 87% of all energy, rely on imported oil, although this has proven
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Dominican Republic
beneficial in the current context of lower oil prices. Finally, the government is moving ahead
with a US$2 billion project for the construction of two coal-powered thermo-electrical plants
in Punta Catalina that will generate 720 megawatts; this was scheduled to be operational in
201719 but work has been delayed due to financing constraints.20 The new timeframe is to
have the plant operational by the third quarter of 2018,21 and the government will be issuing
a US$600 million sovereign bond to finance the project.22
Low Level of Reserves
While reserves are currently at their all-time high, the level of net reserves remains relatively
low at US$5.4 billion (circa 7.5% GDP), although this is a substantial increase compared
to its level of reserves in the early 2000s, when reserves were less than US$600 million. The
major concern with low reserve levels is that it limits the central bank’s ability to defend
the Dominican peso or to support the banking system in the event of a shock. If there were
a shock, it could trigger macroeconomic imbalances that could impact private investors.
For instance, low foreign exchange reserves greatly contributed to the major economic and
exchange-rate crisis in 2003–2004.23 At that time, the country’s foreign exchange reserves
were extremely low, leaving no room for the central bank to adjust.
Oil Dependency
The Dominican Republic is an oil importer; it imports about 90%24 of the energy that it
consumes, and oil imports typically account for 6%–7% of GDP.25 Thus, the country is
highly vulnerable to adverse movements in oil prices. In the past 10 years, oil import expenditures have quadrupled, from US$1.2 billion in 2001 to US$4.3 billion in 2013 before the
oil shock, even though the actual volume of imports has only marginally increased.26 On
the positive side, the current environment of lower oil prices has benefited the country; oil
imports in 2015 were only US$2.5 billion,27 a 28% decrease from 2013.
Quality of Education
The education quality in the Dominican Republic is among the lowest in the world, a
situation the government is trying to improve. An important step toward socioeconomic
development was taken in 2012 when the government committed to allocate 4% of GDP
to the educational budget,28 but the results of this initiative are still unclear. According to a
UNESCO survey, the Dominican Republic ranks 146 out of 148 countries in terms of quality of education, well below the Latin American average,29 and ranks last in Latin America in
terms of literacy, math, and science.30
History of Debt Restructuring and Defaults
A major drawback of the country is its historical tendency to default (defined in the broader
sense of not making payments on due dates as opposed to stopping payments entirely) and/or
restructuring its debt.31 With official creditors, the country was behind on its payments from
1975–2008. With bank loans denominated in foreign currency, the country defaulted from
1982–1994. And with foreign currency bonds, the country defaulted in 2005, and has also
defaulted with local currency bonds for the period 1975–2001. While the amount of some of
the restructured debt is rather insignificant or it involves taking advantage of a 30-day grace
period, it underscores a lack of willingness to make timely payments. 32
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Country Background
Size
48,670 KM2 (132th)
Capital
Santo Domingo
Population
10.6 Million
Religion
Catholic 95%
Median Age
27.8 Years
Literacy Rate
91.8%
Independence
February 27, 1844
Presidents
Danilo Medina (PLD)
Presidential Elections
2020
Economy
Agriculture 5.1%, Industry 32.8%, Service 62.2%
Labor Force
Agriculture 14.4%, Industry 20.8%, Service 64.7%
Merchandise Exports
Gold, Silver, Cocoa, Sugar, Coffee, Tobacco, Meats,
Consumer Goods
Export Partners
US 42.5%, Haiti 16.5%, Canada 8.1%, India 4.8%
Currency
Dominican Peso (DOP)
As of November 2016
Source: CIA
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Dominican Republic
Country Timeline
Return to democracy
1966
Joaquin Balaguer, a Trujillo protege and former leader of the Reformist Party (later to become
the centre-right Christian Social Reform Party (PRSC)), is elected president.
1978
Silvestre Antonio Guzman (PRD) is elected president and proceeds to release some 200 political prisoners, ease media censorship and purge the armed forces of Balaguer supporters.
1979
Two hurricanes leave more than 200,0000 people homeless and cause damage worth 1 billion
dollars as the economy continues to deteriorate due to high fuel prices and low sugar prices.
1982
Another PRD candidate, Jorge Blanco, elected president.
Austerity, unrest
1985
IMF prescribed austerity measures, including price rises for basic foods and petrol, lead to
widespread riots.
1986
Balaguer (PRSC) re-elected president.
1988
Jorge Blanco tried in absentia and found guilty of corruption during his presidential tenure.
1990
Balaguer re-elected, defeating Bosch by a small majority.
1994
Balaguer re-elected, but agrees to serve only a two-year term after being accused of fraud.
1996
Leonel Fernandez Reyna of the Dominican Liberation Party (PLD) elected president.
1998
Hurricane George causes widespread devastation.
2000
PRD returned to power with Hipolito Mejia as president.
2001
May—Appeals court quashes a conviction against former president, Salvador Jorge Blanco,
on charges of corruption.
2001
November—US jet bound for Santo Domingo crashes in New York killing all 255 people on
board. Three days of national mourning declared.
2002
July—Former president Joaquin Balaguer dies aged 95; thousands pay their last respects to a
man who dominated politics for more than 50 years.
2003
November—Deadly clashes between police and protesters during demonstrations against
high prices, power cuts. Two months later, demonstrations about economic policies leave at
least five dead.
Fernandez elected
2004
May—Former president Leonel Fernandez defeats incumbent Hipolito Mejia. Severe floods in
the south-west, and in parts of neighbouring Haiti, leave more than 2,000 dead or disappeared.
2005
September—Congress approves a proposed free trade agreement with the US and Central
American nations. The DR enters the accord in March 2007.
2008
May—President Leonel Fernandez is re-elected.
2010
May—Congressional elections. Governing Dominican Liberation Party (PLD) retains firm grip
on power.
2010
October—Dominican Republic tightens border restrictions to prevent cholera spreading from Haiti.
2012
May—Governing Dominican Liberation Party candidate Danilo Medina wins close presidential
election over former president Hipolito Mejia.
2012
October—Hurricane Sandy causes extensive damage.
2013
September—Dominican Republic's highest court rules that the children of undocumented
migrants are not eligible for Dominican nationality. Human rights groups warn that it could
leave tens of thousands of people of Haitian descent stateless.
2014
May—The Dominican parliament approves a bill to grant citizenship to Dominican-born
children of immigrants.
2016
May—President Danilo Medina is re-elected with a large majority.
Source: BBC
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Notes
1
2
3
4
5
6
As of December 2016.
As of December 2015, Source: Central Bank of the Dominican Republic.
As of December 2015, Source: Central Bank of the Dominican Republic.
As of December 2015, Source: Central Bank of the Dominican Republic.
”Prospectus: Dominican Republic 7.45% Bonds due 2044,” Goldman Sachs, May 2014.
Informe del Flujo Turistico Enero-Octubre 2016 http://www.bancentral.gov.do/publicaciones_economicas/
informe_turistico/informe_turistico2016-10.pdf, accessed on November 21, 2016.
7 ”Prospectus: Dominican Republic 7.45% Bonds due 2044,” Goldman Sachs, May 2014.
8 “Evolution of the PetroCaribe Energy Cooperation Agreement,” SELA, June 2015 http://www.sela.org/
media/1950653/evolution-of-petrocaribe.pdf.
9 “Expresidente dominicano liderará misión de Unasur en Venezuela,” TelesureTV.net, November 16, 2015,
accessed on December 16, 2015, http://www.telesurtv.net/news/Expresidente-dominicano-liderara-mision-deUnasur-en-Venezuela-20151116-0048.html.
10 “Empresas venezolanas invierten 2.000 millones de dólares en Dominicana,” Noitmérica.com, December 17,
2015, accessed on December 21, 2015, http://www.notimerica.com/economia/noticia-empresas-venezolanasinvirtieron-2000-millones-dolares-rdominicana-2015-20151217131613.html.
11 “Magnate venezolano Gustavo Cisneros adquiere la nacionalidad dominicana,” AmericaEcnomia.com, March
17, 2014, accessed on December 16, 2015, http://americaeconomia.com/negocios-industrias/magnate-venezolano-gustavo-cisneros-adquiere-la-nacionalidad-dominicana.
12 As of December 2015, Source: Central Bank of the Dominican Republic.
13 “World Economic Outlook Database,” International Monetary Fund, October 2016, accessed on November 21,
2016, http://www.imf.org/external/pubs/ft/weo/2016/02/weodata/index.aspx.
14 Informe de Politica Monetaria, Central Bank Dominican Republic, November 2015.
15 As of September 2016 http://www.sib.gob.do/transparencia/publicaciones-oficiales/informes-estadisticas/
estadisticas-e-imformes, acessed on November 21, 2016.
16 As of October 2016, http://www.sib.gob.do/transparencia/publicaciones-oficiales/informes-estadisticas/
estadisticas-e-imformes, accessed on November 21, 2016.
17 “Prospectus: Dominican Republic 7.45% Bonds due 2044,” Goldman Sachs, May 2014.
18 “Dominican Republic- Distribution Grid Modernization and Loss Reduction Project,” World Bank, December 15,
2015, accessed December 16, 2015, http://www.worldbank.org/en/news/loans-credits/2015/12/15/dominicanrepublic-distribution-grid-modernization-loss-reduction-project.
19 “CDEEE avanza construcción central termoeléctrica 2 plantas a carbón en Punta Catalina,” Diario Digital
Domincano.com, accessed on November 18, 2014, http://diariodigitaldominicano.com/site/cdeee-avanzaconstruccion-central-termoelectrica-2-plantas-carbon-en-punta-catalina/.
20 Delgado, Esteban, “Las plantas a carbón están limitadas por la falta de recursos,” El Dinero, December 14,
2015, accessed on December 15, 2015, http://www.eldinero.com.do/18726/las-plantas-a-carbon-estan-limitadas-por-la-falta-de-recursos/.
21 Las plantas de Catalina estarán en línea en 2018 http://www.listindiario.com/la-republica/2016/11/05/441955/
las-plantas-de-catalina-estaran-en-linea-en-2018, accessed November 21, 2016.
22 “Senado aprueba emisión de bonos por US$600 MM” http://www.listindiario.com/la-republica/2016/10/27/440700/senado-aprueba-emision-de-bonos-por-us-600-mm, accessed November 21, 2016.
23 As of November 2014, Source: Lazard estimates.
24 “Energy Imports, net (% of energy use),” World Bank, accessed on December 16, 2015, http://data.worldbank.
org/indicator/EG.IMP.CONS.ZS.
25 As of December 2015, Source: Central Bank of the Dominican Republic.
26 “Statistics, Foreign Sector,” Central Bank of Dominican Republic, accessed on October 3, 2014, http://www.
bancentral.gov.do/index.asp.
27 As of November 2016, Source: Central Bank of the Dominican Republic.
28 De Leon, Viviano, “Medina: la mejor inversión en el 2013 será en educación,” Listin Diario, December 27, 2012,
accessed on December 16, 2015, http://www.listindiario.com/la-republica/2012/12/26/259986/Danilo-Medinala-mejor-inversion-en-el-2013-se-hara-en-la-educacion.
29 De la Rosa, Adalberto, “República Dominicana ocupa el lugar 146 de 148 países con baja calidad de educación,”
Diario Libre, July 29, 2015, accessed on December 16, 2015, http://www.diariolibre.com/noticias/educacion/
republica-dominicana-ocupa-el-lugar-146-de-148-paises-con-baja-calidad-de-educacion-NG686708.
30 Sanchez Zinny, Gabriel, “Latin America’s wake-up call on global school tests,” BBC News, April 8, 2015,
accessed on December 13, 2015, http://www.bbc.com/news/business-32161854.
31 As of January 2014, Source: Bank of Canada Database of Sovereign Defaults.
32 “Dominican Republic Offering Memorandum,” April 2014.
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Important Information
Published on 24 February 2017.
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