IMF Executive Board Concludes 2024 Article IV Consultation with Dominican Republic

IMF News, September 10, 2024

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Published: September 10, 2024

Key takeaways and overview

On September 10, 2024, the Executive Board of the International Monetary Fund (IMF) concluded the Article IV consultation with the Dominican Republic and considered and endorsed the staff appraisal without a meeting.
A track record of sound policies and institutional policy frameworks has supported robust and resilient economic growth and low inflation over the last two decades.
Growth moderated in 2023 to 2.4 percent due to tighter global and domestic financial conditions, weak export demand, and transient climate-related factors; this moderation helped inflation converge to the target range (4±1 percent).
The current account deficit narrowed to 3.6 percent of GDP in 2023 and was fully financed by foreign direct investment (FDI).
The financial sector remained adequately capitalized and profitable and weathered the period of tight monetary policy and slower growth.

Outlook and risks

Real GDP growth is projected around its long-term trend of 5 percent in 2024 and over the medium term, with inflation around its 4 percent target.
The current account deficit is projected to gradually narrow to less than 3 percent of GDP and continue being fully financed by FDI.
Near-term risks are elevated and tilted to the downside and include:
- tighter global financial conditions,
- geopolitical tensions,
- volatile commodity prices,
- extreme local weather events.
Medium-term risks are more balanced and include upside potential if key domestic reforms are implemented successfully.
Existing buffers, contingency planning, and agile policymaking can help manage adverse shocks.

Executive Board assessment (condensed)

Endorsed staff’s appraisal emphasizing:
- sound macroeconomic policies and institutions underpinning growth and low inflation;
- improved external position in 2023, broadly in line with fundamentals and desirable policies;
- favorable outlook despite elevated mostly global uncertainty.
Near-term downside risks dominate (including "tighter for longer monetary policy in the U.S., intensification of regional conflicts, or extreme local weather events"); medium-term risks are broadly balanced with upside if reforms succeed.
Recommended policy posture includes maintaining macroeconomic and financial stability, enhancing exchange rate flexibility, and continuing monetary normalization given remaining slack and inflation within the target range.

Policy recommendations and priorities

Monetary and FX policy
- Continue monetary policy normalization given remaining economic slack and that inflation is firmly within the target range.
- Maintain further flexibility of the exchange rate while expanding FX market depth and hedging mechanisms.
- Limit foreign exchange interventions (FXIs) to large shocks that lead to destabilizing hedging and financing premia.
- Expedite recapitalization of the central bank to reinforce its autonomy.
- While international reserves are broadly adequate by traditional metrics, further reserve accumulation is necessary to increase buffers.
Fiscal policy and public finances
- Fiscal policy should focus on rebuilding buffers and meeting critical spending needs.
- The fiscal responsibility law and its planned implementation are welcomed to better anchor medium-term policies and secure debt sustainability.
- Authorities’ planned gradual fiscal consolidation, consistent with the law, is appropriate to place debt on a firmly downward path and build fiscal buffers.
- Undertake integral fiscal reform to durably raise revenues (eliminate tax exemptions and expand the tax base) and improve spending efficiency (reduce electricity sector subsidies and untargeted transfers).
- Reallocate savings to development spending, including disaster-resilient infrastructure, to promote inclusive growth.
Financial sector and regulation
- Continue efforts to modernize the financial and prudential regulatory framework and expand the macroprudential toolkit.
- Close regulatory/supervisory gaps (including for savings and loans cooperatives).
- Continue close monitoring to contain any build‑up of vulnerabilities amid higher-for-longer interest rates and past credit growth increases.
Structural and institutional reforms
- Continue improving public financial management and strengthening revenue administration.
- Advance reforms to education and the labor market, improve social outcomes, and implement climate adaptation and mitigation policies.
- Continue efforts to fully implement the Electricity Pact.

Selected economic indicators and key statistics (as reported)

Population (millions, 2023): 10.7
GDP per capita (2023, U.S. dollars): 11,372
Quota: 477.4 million SDRs / 0.10% of total
Poverty (2021, share of population): 23.9
Main exports: tourism, gold, tobacco
Unemployment rate (2023, percent): 5.3
Key export markets: U.S., Canada, Haiti
Adult literacy rate (percent, 2022): 95.5

Projection / Selected time series (annual percentage change or as indicated)

Real GDP: 2019: 5.1; 2020: -6.7; 2021: 12.3; 2022: 4.9; 2023: 2.4; 2024: 5.0; 2025: (not listed)
Nominal GDP (RD$ billion): 2019: 4,562; 2020: 4,457; 2021: 5,393; 2022: 6,261; 2023: 6,820; 2024: 7,453; 2025: 8,149
Nominal GDP (US$ billion): 2019: 89.0; 2020: 78.9; 2021: 94.5; 2022: 113.9; 2023: 121.8; 2024: ...
Output gap (in percent of potential output): 2019: -0.5; 2020: -6.3; 2021: -1.9; 2022: -0.8; 2023: -1.7
Consumer price inflation (end of period): 2019: 3.7; 2020: 5.6; 2021: 8.5; 2022: 7.8; 2023: 3.6; 2024: 4.0
Exchange rate (RD$/US$ - period average) 1/: 2019: 51.2; 2020: 56.5; 2021: 57.1; 2022: 55.0; 2023: 56.0
Exchange rate (RD$/US$ - eop) 1/: 2019: 52.9; 2020: 58.2; 2021: 57.3; 2022: 56.2; 2023: 58.0
Real effective exchange rate (eop, - depreciation) 1/: 2019: -3.2; 2020: -8.1; 2021: 6.5; 2022: 6.3; 2023: -2.9; 2024: 0.0

Government finances (In percent of GDP)

Consolidated public sector debt 2/: 2019: 53.3; 2020: 71.1; 2021: 62.2; 2022: 58.8; 2023: 59.3; 2024: 58.4; 2025: 57.4
Consolidated public sector overall balance 2/: 2019: -3.3; 2020: -9.0; 2021: -3.7; 2022: -3.6; 2023: -4.0; 2024: -3.8
Consolidated public sector primary balance: 2019: 0.5; 2020: -4.2; 2021: 0.7; 2022: 0.4; 2023: (not listed)
NFPS balance: 2019: -2.3; 2020: -7.6; 2021: -2.5; 2022: -2.7; 2023: -3.1
Central government balance: 2019: -3.5; 2020: -7.9
Revenues and grants: 2019: 14.4; 2020: 14.2; 2021: 15.6; 2022: 15.3; 2023: 15.7; 2024: 16.3; 2025: 15.2
Primary spending: 2019: 15.1; 2020: 18.9; 2021: 15.4; 2022: 15.8; 2023: 15.9; 2024: 14.8
Interest expenditure: 2019: 2.7; 2020: 3.2; 2021: 3.1; 2022: 2.8; 2023: 3.4; 2024: 3.5
Rest of NFPS: 2019: 1.1; 2020: 0.3; 2021: 0.6; 2022: 0.2

Financial sector (Annual percentage change; unless otherwise stated)

Broad money (M3): 2019: 11.7; 2020: 21.2; 2021: 13.4; 2022: 14.3; 2023: 11.5; 2024: 10.7
Credit to the private sector: 2019: 11.8; 2020: 5.3; 2021: 11.6; 2022: 16.6; 2023: 19.6
Net domestic assets of the banking system: 2019: 8.6; 2020: 2.5; 2021: 9.7; 2022: 13.1; 2023: 13.5; 2024: 10.1
Policy interest rate (in percent) 1/: 2019: 4.5; 2020: 3.0; 2021: 7.0; 2022: …
Average bank deposit rate (1-year; in percent) 1/: 2019: 6.7; 2020: 2.3; 2021: 9.9
Average bank lending rate (1-year; in percent) 1/: 2019: 12.4; 2020: 9.2; 2021: 13.6

Balance of Payments (selected)

Current account: 2019: -1.3; 2020: -2.8; 2021: -5.8; 2022: -3.4; 2023: (not listed)
Goods, net: 2019: -10.2; 2020: -8.6; 2021: -12.5; 2022: -15.1; 2023: -13.0; 2024: -12.9; 2025: -12.7
Services, net: 2019: 5.7; 2020: 1.8; 2021: 3.9; 2022: 4.8; 2023: 6.0; 2024: 6.6
Income, net: 2019: 5.2; 2020: 2.9
Financial account 3/: 2019: 4.3
Foreign direct investment, net: 2019: 7.1; 2020: 2.2; 2021: 2.0; 2022: 1.5; 2023: 1.3
Other investment, net: 2019: -5.1; 2020: 0.1; 2021: -1.5
Change in reserves (-increase): 2019: -2.4; 2020: -0.9; 2021: -0.2
GIR (in millions of US dollars): 2019: 8,782; 2020: 10,752; 2021: 12,943; 2022: 14,441; 2023: 15,464; 2024: 15,660; 2025: 16,883
Total external debt (in percent of GDP): 2019: 41.9; 2020: 56.3; 2021: 48.6; 2022: 40.5; 2023: 43.3; 2024: 43.5; 2025: 42.5
Of which: Consolidated public sector: 2019: 27.3; 2020: 40.3; 2021: 35.6; 2022: 33.2; 2023: 33.9; 2024: 32.9; 2025: 32.2

Notes and definitions (as reported)

1/ Latest available.
2/ The consolidated public sector includes the budgetary central government (CG); the rest of the Non-Financial Public Sector, i.e., extra-budgetary central government institutions (decentralized and autonomous institutions), social security funds, local governments and non-financial public companies; and the quasi-fiscal central bank debt. With the dissolution of the state electricity holding company (CDEEE) in 2022, the deficit of CDEEE from 2019 was transferred to the CG.
3/ Excluding reserves.

IMF press release, September 10, 2024.