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AmericasNovember 1 2017

Why the Dominican Republic remains well grounded

The Dominican Republic has weathered regional recession and extreme weather to emerge as a Caribbean leader for GDP growth, driven by tourism. Government measures to strengthen both the economy and physical infrastructure have been recognised with a rating upgrade, as Silvia Pavoni reports. 
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International trips often take unplanned turns for the most disparate reasons, but a hurricane-induced change of schedule is out of the ordinary. This is what happened as The Banker visited the Dominican Republic in early September – the peak month of hurricane season. Luckily, the country suffered much less disruption from Hurricane Irma than other less fortunate countries elsewhere in the Caribbean; its most recent catastrophe occurred nearly two decades ago in 1998.

Dealing with extreme climate events that are becoming both increasingly frequent and devastating remains a harsh reality, however, and the country is building a solid infrastructure to mitigate the problem. Resilient buildings are essential to safeguard a booming economy that relies heavily on tourism and has been growing at a rate that is exceptional in an otherwise stagnating region. In 2016, gross domestic product (GDP) grew by 6.6% and was the largest in Latin America and the Caribbean for the third consecutive year. Although likely to be lower, forecasts for 2017 and 2018 are also encouraging.

Rating upgrade

Indeed, a better managed economy and the strength of a diversified tourism sector gave rise to Moody’s upgrade of the Dominican Republic’s long-term debt to Ba3 in July, pushing it out of the highly speculative area to a few notches below investment grade.

The rating agency is monitoring the fiscal deficit and rising public debt as the Caribbean country continues to grant a high level of tax breaks to attract private sector investment, says analyst Ariane Ortiz-Bollin. At a consolidated 4.3% of GDP, the fiscal deficit is still a marked improvement on the past, however, and the International Monetary Fund recently praised the government for its “strong revenue administration effort”.

Furthermore, adds Ms Ortiz-Bollin, without those incentives, economic growth may have been much weaker. In the following articles, we will cover the policies, institutional changes and investor incentives the Dominican Republic has designed to sustain growth and development, which are also helping it to cope with hurricanes.

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Read more about:  Americas , Americas , Dominican Republic
Silvia Pavoni is editor in chief of The Banker. Silvia also serves as an advisory board member for the Women of the Future Programme and for the European Risk Management Council, and is part of the London council of non-profit WILL, Women in Leadership in Latin America. In 2019, she was awarded an honorary fellowship by City University of London.
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