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Economic Development
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Doing Business 2012-Dominican Republic
Economy Profile
This economy profile presents the Doing Business indicators for Dominican Republic. To allow useful comparison, it also provides data for other selected economies (comparator economies) for each indicator. The data in this report are current as of June 1, 2011
Doing Business sheds light on how easy or difficult it is for a local entrepreneur to open and run a small to medium-size business when complying with relevant regulations. It measures and tracks changes in regulations affecting 10 areas in the life cycle of a business: starting a business, dealing with construction permits, getting electricity, registering property, getting credit, protecting investors, paying taxes, trading across borders, enforcing contracts and resolving insolvency.
source: World Bank/IFC
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Doing Business 2011: Making a Difference for Entrepreneurs
According to the 2010 Doing Business Report the Dominican Republic improved its global ranking on overall ease of doing business from 102 to 86 among 183 economies. According to this study findings, the country strengthened investors protections with a new company law-making, becoming the runner-up global reformer in this area.
Challenges
Even while the prospects for the Dominican Republic to maintain sustained GDP growth and macro-economic stability are good, the food crisis and high petroleum prices will translate into inflation higher than expected. To this must be added the consequences of the damage to agriculture caused by the tropical storms Noel and Olga at the end of 2007.
On the other hand, there are factors which put the future growth at risk. The Dominican economy is closely tied to the United States and the economic slowdown of that country could retard the growth of the Dominican Republic given the possibility of lesser demand for export, a drop in direct foreign investments and less remittances.
source: World Bank
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Economic Trends for 2007
The Economic Survey of Latin America and the Caribbean 2007-2008 states, that in 2007 the Dominican Republic recorded a real 8.5% increase in its GDP, continuing the sharp upward trend observed in the previous biennium (10% per year on average). Inflation stood at an annual rate of 8.9%, and a fiscal surplus equivalent to 0.1% of GDP was achieved, while the balance-of-payments current account deficit increased significantly to reach 5.4% of GDP.
Economic Policy for 2007
Economic policy continued to be pursued in accordance with the guidelines set out in the agreement concluded
with the International Monetary Fund, which was in force until January 2008. Rising international prices and
contingency outlays to mitigate the effects of natural disasters created some fiscal pressure, but this was absorbed without undermining the country’s macroeconomic stability objectives.
Source: ECLAC
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Inflation Crisis: A Monetary Phenomenon
Main Source: IMF “The Quest for Price Stability in Central America and the Dominican Republic”
IMF investigates the reason for indomitably high inflation in Central America and the Dominican Republic; and why inflation has yet to converge to stable prices. Empirical analysis illustrates how all Central Banks within the Central American (including Dominican Republic) region have vaguely implemented a standard monetary policy to combat inflationary pressures. Despite the institutional strengthening of monetary policy, important flaws remain in most central banks, in particular a lack of a clear policy mandate and little political autonomy, which are adversely affecting the consistency of policy implementation. To effectively combat inflation, a possible solution would be to increase interest rates. Emperical findings suggests that when adopted, only some Central Amercian countries have thoroughly raised interests rates to tackle inflation, whilst simultaneously, other Central Banks (in Central America and Dominican Rep.) tried to protect their exchange rate stability. The potential policy conflict arising from a dual central bank mandate and the unpredictable policy response is probably undermining markets’ confidence in central banks’ commitment to price stability, thereby perpetuating an inflation bias.
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Income Inequality Distribution
Latin America has the highest levels of income inequality of any region in the world. This has been one of the most pervasive characteristics of the region for the past 50 years (de Ferranti et al. 2003). Within Latin America, the subset of countries in Northern and Central Latin America and in the Caribbean suffers from some of the lowest levels of social development with high poverty rates, high, intransigent social inequality and a majority of the populations in each country living in conditions of social exclusion and vulnerability.
Despite the improvements in growth and structural reforms and a decrease in poverty rates, consistent improvements in social development remain elusive. Income inequality has failed to show any consistent decline across countries. In addition, the achievement of the first Millennium Development Goal (MDG), that is the reduction, by half, of the population living in extreme poverty, is unlikely to be met by the 2015 deadline for many countries in the region, if progress in economic and social development continues at its current rate (ECLAC, 2002).
The results from a study (which investigates the relationship between individual and household characteristics and income inequality) are very heterogeneous, reflecting the differences across countries over the period. Individual characteristics can explain more of individual income inequality than household characteristics can explain for household income inequality. Regional differences, education and labour market characteristics have the greatest effects upon the level and changes of income inequality in Central America, the Dominican Republic and Mexico. Declines in the agricultural sectors of the countries and shifts to urban areas reflect the structural changes taking place in the economies, and these factors are important determinants of inequality change. In addition, the rise of the informal sector of employment with its lower benefits and job security has contributed increases in income inequality. However a significant proportion of inequality levels and trends across households and individuals could not be explained by individual or household characteristics. The explanatory power of the results for individual income inequality corresponds with other work conducted for individual income earners within and outside the countries included in this study. In contrast the inability of household characteristics to explain much, if any, household per capita income inequality is not consistent with findings from similar studies. Further work is needed to conduct an in depth investigation into the links between household income inequality and individual income inequality.
Tourism
Tourism became Dominican Republic’s main foreign exchange earner in 2006. The past output strength of the sugar cane and agricultural sector is now overshadowed by the service sector, which now accommodates for more than half of the labour force population (and compositional value top GDP). Inflation has not yet to be contained from since 2000 and political tensions became common after the collapse of the second commercial bank of the country (Baninter), linked to a major incident of fraud valued at 3.5 billion dollars during the administration of President Hipolito Mejia (2000-2004). (Source: Wikipedia: Economy of Dominican Republic)
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Dominican Republic Country Economic Memorandum: The Foundations of Growth and Competitiveness. September 2006
The Dominican Government is pleased to present, jointly with the World Bank, the Dominican Republic Country Economic Memorandum: The Foundations of Growth and Competitiveness. This report, the result of extensive research on Dominican economic performance and its determinants, was carried out with careful methodological rigor by a highly qualified World Bank team. The results of the study were discussed in detail with and enriched by key inputs from the government agencies involved in policymaking related to increasing competitiveness.
source:World Bank
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Dominican Republic - Review of Trade and Labor Competitiveness
This report addresses a range of themes related to trade and competitiveness in the Dominican Republic. The analysis examines past trade performance and the many factors The conclusions drawn from this work have important policy implications that could be external trade environment will necessitate a shift in the way the Dominican economy operates in order to remain competitive. The immediate effect of trade liberalization will be reduced protection and therefore greater competition for Dominican producers, which will in turn create pressure for raising productivity and increase demand for a more skilled work force. The resulting reduction in tariff revenue will be offset and job creation and destruction, as producers transition to the new trade environment.
source:World Bank
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World Bank. Dominican Republic Country Brief
DEVELOPMENT PROGRESS
Throughout the 1990s, the Dominican Republic ranked among the fastest growing economies in the Latin American and Caribbean region. During 1991-2000, the economy grew on average by 5.9 percent per year and per capita income increased by 4.1 percent per year. The sustained economic growth over the last 30 years contributed to the welfare of most Dominicans and accelerated poverty reduction, as can be seen in various social indicators
source:World Bank