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Financial Center
The Dominican economy registered real GDP growth of 3 percent and inflation of around 6 percent in 2008 despite the impact of an unprecedented global economic and financial crisis and two hurricanes, one in 2007 and the other in 2008.
This information was revealed by an IMF Team which was in Dominica recently for discussions with representatives from both the public and private sectors.
According to the IMF, the Dominican economy (like the rest of the Caribbean region) has been severely affected by the global economic crisis, compounding the losses from two hurricane strikes within the last two years.
The Mission’s concluding statement also revealed the following:
• As a result of the global economic crisis, real output growth is expected to be around 1 percent in 2009 reflecting lower remittances and tourist arrivals and a slowdown in Foreign Direct Investment (FDI) related construction;
• Real GDP growth is projected to reach 2 percent in 2010;
• The decline in the tourism sector is expected to be partially offset by reconstruction activity as damaged infrastructure is rehabilitated or replaced;
• The implementation of the second phase of the income tax reform programme from January, 2009 is expected to help stimulate economic activity;
• Inflation risks remain high from the volatility in oil and commodity prices;
• Delayed recovery of the global economy could further reduce tourist receipts and FDI inflows;
• Inflation for the calendar year 2008 averaged around 6 percent;
• Rising food and fuel prices during the first half of the year (2008) impacted negatively on the country’s balance of trade position. This situation was exacerbated by higher construction–related imports and lower exports due to closure of a major component of the business of Dominica Coconut Products;
• Stay-over tourist arrivals declined by around 14 percent in the first four months of 2009 and are projected to decline by 15 percent in 2009;
• Remittances are expected to decline and FDI is projected to fall by almost 50 percent as activity in tourism-related projects has slowed or been postponed.
The IMF stated that it supports the Government’s overall economic recovery strategy, which is aimed at fostering private sector growth by improving the business climate and enhancing infrastructure.
The Mission noted that the accelerated implementation of capital projects is also helping to ameliorate the unemployment impact and the improved targeting of social spending will protect the more vulnerable groups.
The IMF Mission commended the Government’s success in keeping recurrent expenditure under control and believes this will help avoid fiscal slippages, improve competitiveness and contain pressures on the country’s balance of trade position.
The Mission also commended the Government for its success in reducing the public debt ratios despite recent natural disasters and external shocks that have increased expenditure and reduced growth.
The IMF welcomed the Government’s aim to achieve a primary fiscal surplus of 3 percent of GDP over the medium term, a situation which would keep the public debt to GDP ratio on a declining path and would keep Dominica on course to achieve the internationally accepted prudential limits for public debt.
The collaborative efforts between the Government of Dominica and the Eastern Caribbean Central Bank (ECCB) to improve the regulatory framework for non-bank financial institutions will help to close existing loopholes in the regulatory framework for the financial sector, the Mission concluded.
While the Dominican economy has been affected by the global economic downturn through declining remittances, a decline in stay-over tourists and a reduction in foreign direct investment, near term prospects for economic growth in Dominica are better than most OECS countries.
The Government remains optimistic that the fiscal and economic policies that it has pursued over the last six years will serve Dominica well as it works to cushion the negative impact of the global economic crisis.
