Our Dominican Central Bank Economic Overview
For the third straight year, the Dominican economy exhibited solid growth, reaching 8.5% between January and December of 2007. The country’s GDP, calculated on a 1991 base, grew on average 9.5% between 2004 and 2007. Adding to the dynamic growth of the Dominican economy is the continued expansion of various sectors, including finance (25.6%), communications (14.9%), commerce (13.9%), energy and water (9.7%), transport (6.8%), education (5.7%), and other services (5.2%).
Additionally, the local manufacturing sector registered a 4.8% increase, while construction, hotels (including bars and restaurants), and agriculture grew by 3.2%, 3.7%, and 1.2% respectively. However, some sectors experienced negative growth during 2007, including mining (-1.4%) and free trade zones (-10.0%).
Private spending increased by 12.3%, attributed to a strengthening exchange market and relative inflation stability. Other factors contributing to private consumption included a 31.4% increase in banking credit to the private sector and a 22% expansion in dollar-valued goods.
Inflation at the close of 2007 was a stable 8.88%, maintaining single digits despite international pressures on the Dominican economy. According to the Central Bank, inflation could have been as low as 5.68% if not for the sharp rise in international petroleum prices. In addition, Tropical Storms Olga and Noel caused significant damage, further pushing up inflation levels.
Unemployment at the end of 2007 saw a 0.1% decrease, with a 15.5% unemployment rate in April 2007 and a 4.2% decrease by October 2007. These figures reflect the creation of 392,113 new jobs between April 2004 and October 2007.
The balance on the current accounts in 2007 was –US$2.23 billion, mainly due to an increased deficit in the balance of payments.
In absolute terms, imports in 2007 grew to US$13.81 billion, an increase of US$1.64 billion compared to 2006. The growing need for petroleum and soaring global prices drove up total imports, with petroleum imports alone increasing by US$479.3 million during 2007.
Exports, including free trade zones (FTZs), grew by US$627 million in 2007, thanks to general price increases on merchandise and a rise in world nickel prices, for which the Dominican Republic is a top producer. Non-traditional product exports also increased by US$263.8 million in 2007. However, FTZ exports during the same period decreased by 2.5%.
In terms of services, tourism generated an additional US$108.7 million in revenue, with a 1.7% increase in the number of tourists and a 3.1% increase in spending per tourist.
Remittances also increased. According to the Central Bank, remittances grew by 10.8%, representing 7.4% of GDP and 89% of transfers registered in the balance of payments.
Foreign direct investment (FDI) was also on the rise. Initial figures show that the financial and capital accounts closed with a US$2.554 billion surplus in 2007, more than US$764 million higher than at the close of 2006.
The Dominican Republic continued its strong growth through 2007. By year’s end, the central government had a surplus of US$1.619 billion. The Non-Financial Public Sector (SPNF) also ended the year with a surplus of RD$1.450 billion, remarkable considering the government increased spending during this period in response to Tropical Storms Olga and Noel. According to ECLAC, about RD$14.125 billion was spent on storm recovery.
Government revenues increased 25% during the period, rising from RD$188.9 billion in 2006 to RD$236 billion in 2007. However, spending increased by a total of RD$36.14 billion (17.6%) compared to 2006.