Economic Growth

In the last 25 years, the Dominican Republic has transitioned from an economic system based on the exportation of agricultural goods towards an economy based on the exportation of services. Though the majority of the country's reserves historically came from the export of sugar, coffee, cocoa, tobacco, and, to a lesser degree, nickel and gold, the Dominican economy today is significantly defined by tourism, free trade zones, remittances, and even baseball players.

During the late 1990's, the economy of the Dominican Republic was growing at a rate of 8% annually, making it one of the highest growth economies of the region and the world.

More recently, the economic crisis of 2003-2004 was triggered by the fraudulent bankruptcy of one of the country's main commercial banks. This event caused high levels of uncertainty about the Dominican economy, both in economic agents and in the population at large. Perceptions of instability were heightened when, after taking several unwise financial measures to respond to the crisis, the national economy continued to suffer and the country was forced to seek help from international multilateral organizations.

The wave of confidence in the Dominican economy generated by the administration President Leonel Fernández, combined with measures put into place as of August 2004, has allowed for significant economic recuperation in the country. Stable price levels and strong growth forecasts from the Central Bank of the Dominican Republic reflect this stability.

Economic Growth

Table 1 – Gross Domestic Product (1970 prices) – Source: Central Bank of the Dominican Republic

Since the 1970's, the Gross Domestic Product (GDP -- the annual balance sheet of the productive sectors of a national economy), measured in 1970 prices (which allows for inflation to be taken into account) has maintained a tendency towards growth. This means that, despite constant ups and downs, the Dominican economy has shown significant growth over the past 35 years.

Table 2 – Annual Growth of the Dominican Economy Since 1970 – Source: Central Bank of the Dominican Republic

When we analyze the annual changes to a country's growth rate, we are able to observe the most critical moments that national economy has undergone and the repercussions those events have had. The accompanying tables clearly show that the Dominican economy maintained a healthy balance in terms of growth during the 1970's, then fell significantly at the start of the 1980's (due in part to crisis and political instability at the time), and recuperated in the second half of the 1980's when the government invested large sums of money in infrastructure. During the period shown on the graphs, the most critical point in the growth of the Dominican economy was between 1990-1991, when the international political environment was very unstable and the international oil price crisis gravely affected all oil-importing counties (such as the DR).

Starting in 1993, the Dominican economy began to recover. The peak of economic growth was 1996-2000, when sound government policies and a more stable international context combined to allow significant economic recuperation. During these four years, the DR grew about 8% annually, becoming one of the fastest growing economies of the region and even the world.

Between the years 2003-2004, and as a result of the banking crisis and a strong depreciation of Dominican currency caused by unwise domestic policies, the DR's debt practically doubled, forcing the country to approach the International Monetary Fund (IMF) and renegotiate with other creditors in order to overcome capital shortages. Dominican society suffered under a strong macroeconomic crisis which, without a doubt, diminished the standards of living and overall wellbeing during these years.

The policies adopted in August 2004 have allowed for a significant economic recovery, as illustrated by growth rates of approximately 9% at the end of the year 2005 and an estimated 5.5% for the year 2006 according to the Central Bank of the Dominican Republic.