Foreign direct investment (FDI) in the country has exceeded USD 4 billion in the last three years.
Fitch Ratings credit rating agency points out that the Dominican Republic is the only country with a positive outlook in its risk rating in the entire Central American region, as highlighted yesterday by the Central Bank of the Dominican Republic (BCRD).
In its descriptive analysis entitled “Emerging economies in the face of a changing external environment: Some advantages for the Dominican economy”, the BCRD highlights that, given the confidence that foreign investors seem to have in the Dominican economy, it is not surprising that foreign direct investment (FDI) in the country has positioned itself as the highest in Central America, exceeding USD 4 billion in the last three years.
According to the bank, in 2024 alone, FDI reached USD 4,512 million, a historic figure for the Dominican Republic.
The report also recalled that the country’s economy registered the highest growth in the region in 2024, 5.0%, while maintaining year-on-year inflation within the 4.0% ± 1.0% target range, closing the year with a 3.35% inflation rate and with core inflation in the center of that target range.
The report goes on to say that the nation shows a stable outlook with a 4.8% unemployment rate and a record 5.05 million people employed.
The country’s macroeconomic strength is also mirrored in a financial sector that remains healthy and well capitalized, as the governor of the Central Bank, Héctor Valdez Albizu, recently explained when presenting the Financial Stability Report published by the institution.
This report concludes that, after carrying out stress tests on financial intermediation entities, there is no evidence of significant macro-financial risks that could threaten the provision of financial services in the short term in the Dominican economy.
The fiscal and external data for 2024 also contribute to a high assessment of the macroeconomic fundamentals in the DR. In this regard, the central government recorded a deficit close to 3.0% GDP as of December last year, achieving a reduction in the consolidated public sector (CPS) debt of almost one percentage point of GDP, from 58.3% of GDP to 57.5% of GDP. On the other hand, the current balance of payments account deficit was also around 3.0% of GDP, covered entirely by foreign direct investment.
The Central Bank’s analysis highlights that, thanks to its performance in recent years, both the size of the Dominican economy measured by nominal GDP in dollars, and the per capita income of Dominicans, have grown significantly, reaching a better positioning among Latin American countries.
At the end of 2024, the country’s nominal GDP in dollars was about USD 124.5 billion, making the Dominican economy the seventh largest in the region. Similarly, nominal GDP per capita stood at around USD 11,500, also the seventh highest among all Latin American countries.
Macroeconomic fundamentals and stability in the DR
Although there was an upward trend in the demand for foreign currency in January and February 2025 resulting in a 1.8% cumulative depreciation of the Dominican peso as of February 20, to a certain extent this is due to six factors, one being the impact on the economic agents’ expectations in light of the tariff measures announced by Trump.
Similarly, it is due to the high interest rates prevailing in the United States; downward resistance in U.S. inflation, which stood at 3.0% year-on-year last January, above the medium-term target of 2.0%; and that the Federal Reserve (FED) is expected to maintain a more restrictive monetary policy stance for this year. This is a new challenge for emerging economies and for the interest rate decisions of their central banks.
Another factor is the circumstantial aspects linked to the seasonal component of inventory replenishment of sales registered during November (associated with Black Friday, which is becoming more and more popular in the country) and during the December festivities, which is the month of the year with the highest commercial activity.
And, finally, the increased volatility of international financial markets.
Watchful for 2025
The BCRD reported that it remains watchful for 2025 and willing to use its policy instruments to fulfill its mission of maintaining price stability, in a global scenario that is becoming more complex and presents multiple risks. For this reason, it ratified its commitment to macroeconomic stability and to promoting favorable conditions that contribute to the sustained growth of the economy.
Forecast for 4.5% Economic growth
The Central Bank sees 2025 as a year of challenges for emerging economies, particularly those in Latin America. It highlights that according to the International Monetary Fund, the region would grow on average 2.5% in 2025, a rate below the 3.3% average growth expected for the world economy.
In contrast, the DR economy would expand well above average and continue to be one of the region’s growing leaders.
Indeed, the latest growth projections for the Dominican economy point to an expansion of around 4.5% for this year in a global context that remains uncertain. One element that could contribute to this performance would be greater dynamism in public investment in the coming months.
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