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Dominican Republic

Steady rhythms of resilience

Last update – January 2025

Country risk rating 


LOW RISK
Economic risk

Slight risk of payments disruption
Business environment risk
Moderate risk of payments disruption
Political risk

Slight risk of payments disruption
Commercial risk
Low risk of payments disruption
Financing risk
Moderate risk of payments disruption

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Form of state
 Presidential republic
Head of government
 Luis Abinader (president)
Next elections
 2028, presidential

Strengths & weaknesses

  • Consistently high GDP growth, averaging +5% since the 1970s
  • Record-breaking tourism revenues, contributing 20% of GDP in 2024
  • Strong political stability and a clear pro-market reform mandate
  • Persistent high inequality and poverty rates limit market potential
  • Dependence on oil imports and vulnerability to extreme weather events
  • Cross-border instability with Haiti poses economic and social risks

Economic overview

Tourism and remittances drive a steady beat

The Dominican Republic has sustained robust economic growth for decades, with GDP growth averaging +5% since the 1970s. The post-pandemic recovery showcased the economy’s resilience, with an impressive +12.3% growth in 2021 and +4.9% in 2022, supported by a booming services sector and expansionary fiscal policies. However, in 2023, global economic headwinds slowed growth to +2.3%. Despite this, tourism – contributing USD26bn, or 20% of GDP in 2024 amid a record-high 11mn arrivals – and remittances, which accounted for USD10.8bn (8.8% of GDP) mostly from the US, sustained domestic consumption.

Inflation stabilized at +4.8% in 2024, a significant reduction from the +8.8% peak in 2022. The Central Bank of the Dominican Republic (BCRD) adopted a more accommodative monetary stance, gradually lowering its benchmark interest rate from 8.5% to 6% in 2024. The rate may decrease further to 5% by 2025, slightly below the neutral level. Meanwhile, government efforts to expand liquidity and extend subsidies for fuel and electricity have mitigated inflationary pressures.

Real GDP growth is expected to decelerate mildly in 2025 and 2026 to +4.5% and +4%, respectively, due to reduced inputs from the US economy. However, tourism expansion, improved liquidity and a normalization of external conditions will sustain growth. Exports under free trade zones will also sustain growth as they reached USD8.6bn in 2024, up 6.9% from the previous year, with total exports setting a record of USD12.9bn.

Reforms chart a course through uncertainty

The Dominican Republic’s medium-term economic prospects remain positive, bolstered by prudent fiscal and monetary policies. With public debt reaching 58% of GDP in 2024, fiscal discipline is expected to narrow the deficit to 3% by 2025. President Luis Abinader’s administration is pursuing fiscal consolidation via incremental reforms to widen the tax base, reduce evasion and control expenditures. These efforts are critical after a comprehensive fiscal reform failed in 2024.

Investment is set to remain robust, with nearshoring activities driving foreign direct investment (FDI). However, the currency may face pressure from a narrower US interest-rate gap due to BCRD’s easing. Extreme weather events present a significant downside risk. La Niña conditions, combined with rising water temperatures, increase the likelihood of hurricanes, threatening infrastructure and economic stability. Climate-related disasters already cost approximately 0.5% of GDP annually.

Additionally, Haiti’s ongoing security crisis poses medium-term risks. The Dominican government maintains a partial border closure, critical for containing spillover violence. Haiti is also a key export destination; stabilization there could lead to normalization in 2025. However, prolonged instability would weigh on growth and bilateral trade.

A strong mandate meets enduring challenges

Political stability remains a cornerstone of the Dominican Republic’s economic outlook. The May 2024 re-election of President Abinader and his Partido Revolucionario Moderno (PRM) with a congressional supermajority ensures continuity for pro-market reforms. High approval rates and a strong mandate provide an opportunity to advance labor, healthcare and education reforms, with a labor bill vote expected in early 2025.

The country’s rank of 58th in the 2024 Index of Economic Freedom reflects strong business freedom but highlights issues with government integrity, as perceived corruption remains high. Sporadic protests tied to corruption scandals may arise but are unlikely to disrupt the overall stability. Persistent social challenges, including income inequality, crime and unreliable electricity supply, continue to constrain the business environment.

Cross-border relations with Haiti remain strained due to migration and security concerns. While President Abinader’s decisive actions – such as sealing the border and deporting undocumented migrants – have garnered domestic support, they have also created tensions with the US, the Dominican Republic’s largest trade partner. Resolving these issues will be crucial for maintaining strong diplomatic ties and sustaining economic growth.

Despite these risks, the Dominican Republic’s stable political landscape and targeted reforms position it as a resilient investment destination, capable of navigating challenges in the years ahead.

Trade structure by destination/origin

(% of total, 2023)

Trade structure by product

(% of total, 2023)

Contact 

Luca Moneta
Allianz Trade
+33 (0) 6 70 27 40 16
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