The Economy in this Caribbean island is booming
Dominican Republic’s economy has the biggest growth potential in Latin America and the Caribbean. GDP growth in the first quarter of 2015 was 6.5%, much better than the 5% forecast (2015) and ranked second in the region. In the following paragraphs, we will take a closer look at the different factors that have propelled the Dominican Republic into one of the fastest growing economies in the region.
Dominican Republic offers some of the most beautiful and diverse topography in the world. Dominicans are warm and welcoming people, whose charm does not go unnoticed by the millions of tourists visiting the island on a yearly basis. Over 5 million tourists visited the island last year, generating a foreign currency inflow of US$5.6 billion (up by 11.3% versus 2013). The Dominican Republic is also rich in natural resources such as cocoa, coffee, fruits, vegetables and precious metals. In fact, gold and silver accounted for 40% of total exports in 2014. The construction sector, fueled by an increase in real estate loans, grew 14.9% (Q1 2015).
A healthy financial system is the backbone of any economy. The financial sector is playing a major role in driving GDP growth. As of June 2015, the financial services sector makes up roughly 4% of total GDP. The financial services industry grew 7.4% in the first quarter of 2015. The Dominican capital markets have also been an important source of funding for both private companies and government institutions. The Dominican government successfully auctioned US$3.5 billion in sovereign bonds during the first half of 2015 (global capital markets).
Dominican financial institutions (Banks, Credit Unions, and Savings & Loans) are well-capitalized and solvent. The average capital requirement for financial institutions operating in Dominican Republic is 11%. The average solvency ratio for the financial sector as whole is 18% (well above the minimum capital requirement).
Last but not least, the USD/DOP pair has been very stable since the beginning of this year. The DOP has depreciated only 0.4% (YTD), which is very low for an emerging market economy.
Editor’s note: Dominican Today welcomes Mr. Javier Trullols to its team of dedicated professionals whose Op-Ed contributions benefit our readers and Dominican society. Mr. Trullols is a Banking and Financial services professional, MBA.