- Basic data
- Public finances and the state budget
- Banking system
- Tax System
The Dominican Republic profiles itself as an economically open country that promotes free trade and is one of the most sought-after tourist destinations in the Caribbean, the largest economy in the region and a middle-income country. The DR has experienced significant economic growth in the last decade and before the outbreak of the pandemic was one of the fastest growing economies with low inflation and unemployment in the region. Between 1993 and 2019, GDP growth averaged 5.3% per year, but in 2020, due to the coronavirus pandemic, GDP fell by 6.6%. However, the DR was able to quickly emerge from the crisis and in 2021 showed economic growth of 12%, which represents one of the highest levels in Latin America and the Caribbean region. The Dominican economy is estimated to grow by 6.1% in 2022. In the last few years, the DR has achieved a significant reduction in unemployment, from 8.8% in 2012 to 7% in 2021. It is estimated that in 2022 unemployment will decrease slightly. However, inflation has been increasing in recent years. In 2019, prices grew by 1.8% year-on-year, while in 2021 inflation already reached 8.2%. Inflationary pressures are mainly caused by a significant increase in the prices of oil and other important raw materials for local production, high costs of international container transport and disruption of supply chains. Check ebizdir for economical facts of Dominican Republic.
The Dominican economy is closely integrated into the global economy with an external openness coefficient of 35%. In other words, it is an economy that depends heavily on international trade, capital flows, remittances and tourism. In the past, the DR was dependent on the export of agricultural commodities (especially sugar, cocoa and coffee), but in the last 30 years it has diversified its economy into services, industry, agriculture, mining and trade. The service sector represents more than 60% of GDP, industry 24.2% and agriculture only 5.68%. The strong performance is driven by tourism and a favorable relationship with the US. DR mainly exports gold, cigars, nickel, medical equipment, jewelry, clothing, footwear, cocoa sugar. Exports go mainly to the following countries: USA, Haiti, Switzerland and India. Imported commodities include petroleum, food, cotton and textiles, chemicals and pharmaceuticals. The main import partners are the USA, China, Mexico and Brazil. The trade balance has been negative for a long time. In recent years, there has been a significant increase in remittances sent to the DR. In 2021, there was an increase in remittances by 26.6% compared to 2021. It was 10.4 billion USD, which is billion more than in 2020. Remittances are, together with tourism, the most dynamic sector of the Dominican economy
|GDP growth (%)||5.1||-6.6||12||6.1||4.5|
|Export of goods (billion USD)||9.6||9.3||12.4||13.4||13.9|
|Import of goods (billion USD)||20.9||16.3||23.2||27.2||28.6|
|Trade Balance (Billion USD)||-9.1||-6.8||-10.8||-13.8||-14.7|
|Industrial production (% change)||ON||ON||ON||ON||ON|
|OECD export risk||04.VII||04.VII||04.VII||ON||ON|
Source: EIU, OECD, IMD
Public finance and state budget
|State budget balance (% of GDP)||-2.7|
|Public debt (% of GDP)||64.7|
|Current account balance (billion USD)||-2|
Due to the coronavirus crisis, public finances in the DR are under pressure. There was an increase in the state budget balance and public debt reached a record level of 64.7% of GDP and a value of 47.6 billion dollars. The current account balance is in deficit. The DR has long-term efforts to increase government revenues thanks to more effective tax and customs collection. The large level of indebtedness will generate strong fiscal pressures between 2023 and 2026, when nearly $20,000 million in debt service payments will be made just to cover non-financial public sector debt obligations.
The banking system of the Dominican Republic is headed by the Central Bank (Banco Central de la República Dominicana), which was established on October 9, 1947 and regulates the country’s monetary system. The banking system provides standard banking services and includes commercial banks, mortgage banks, savings and loan institutions and development banks. The main financial source of financing the private sector are commercial banks, which usually provide short-term loans, medium-term and long-term loans for the construction and tourism sectors are provided by mortgage banks. Savings and loan institutions also make it possible to obtain long-term housing loans. State and private development banks offer loans mainly for financing projects in priority sectors such as agriculture, tourism, industry, transport and services.
There is also a system of multibanks in the DR, capable of providing all commercial, mortgage and development bank services.
Government banking institutions: Banco Central de la República Dominicana, Banco Agricola de la Republica Dominicana, Banco Nacional de las Exportaciones
Non-governmental banking institution: Banreservas – the largest and best-rated bank in the DR Banco Popular Dominicano – operates the largest network of banks in the DR and focuses on financial solutions, savings, loans to citizens and insurance
Banco BHD León – one of the largest banks, in addition to services to citizens, also focuses on services for small and medium-sized businesses
Other important banks include: Banco Vimenca, Scofiabank, Banco Unión, Citibank, Banco Múltiple Activo Dominicana, Banco Caribe, Banko BDI, Bellbank, Banesco, Bancamérica, etc.
The average interest rate ranges from 3 to 4.5%.
The most frequently used forms of payment are payment in cash, supplier credit and documentary letters of credit and direct debit.
Taxation in the Dominican Republic is governed by Law No. 11-92 of May 31, 1992, commonly known as the Tax Code (Codigo Tributario) and its amendments. Taxes are collected by the Internal Revenue Service (Dirección General de Impuestos Internos or DGII). Dominican tax law is primarily territorial. All income from work or business activities in the DR is taxable, regardless of whether the person is a Dominican citizen or a foreigner with a long-term residence in the DR. Income from work performed outside the DR, whether by Dominican citizens or foreigners with long-term residence in the DR, is not subject to tax. An exception to the principle of territoriality is income from financial investments abroad (shares, bonds, etc.), which must be taxed in the DR. Personal income tax is based on annual income and is divided into a scale with four tax levels of 0%,
Corporate income tax is set as a flat 25% tax on net taxable income (Article 297). All legal entities must submit a tax return by April 30 of each year at the latest. Capital gains are defined as the difference between the sale price of the asset and the purchase price adjusted for inflation (Art. 289). Capital gains are taxed as ordinary income. Furthermore, the country has a tax on the transfer of industrial goods and services (ITBIS), which is set at 16%. ITBIS is a value added tax that is applied to the importation of most goods and services (No. 335). There are many exemptions from ITBIS (No. 342 and 343) which include, for example, exported goods, staple foods, medicines, fuel, fertilizers, books and magazines, educational materials, financial services, transport services, house rental, educational and cultural services.