Ambiguity of the Dominican economy

In the United States, where unemployment is at an all-time low of 3.5%, consumption has become one of the key elements in the growth of the U.S. economy.

Americans buy, among other things, food, clothing, footwear, household appliances, cell phones and motor vehicles. Much of the production of these goods is usually done outside the United States.

As a consequence of this increase in North American consumption, the Dominican Republic’s export processing zones experienced an expansion during the first four months of 2021. It obtained a growth of 23.1%.

Similarly, construction expanded by 53.1%. Tourism was still at a standstill during the first four months of last year; and for this reason, it had a decrease of -23.3%.

Remittances reached the appreciable figure of 3,459 million dollars during the months of January through April of last year.

These levels of reactivation of the aforementioned sectors of the Dominican economy were a direct result of the monetary and fiscal expansion policy of the United States government.

This, of course, was combined with an analogous policy on the part of the national authorities, which generated levels of financial liquidity that were expressed in an increase in private investment, both domestic and foreign.

Naturally, some of these figures are inflated as a result of the statistical rebound experienced. This is so because they have been calculated in relation to the year of the pandemic, 2020, and not with respect to 2019, which is the one for which a standardized index of measurement is available.

Decline in national production
Despite the statistical rebound that adds to the economic reactivation of 2021, the agricultural sector, however, had during the months of January to April 2021, mediocre results. It grew only 1.3%.

During the entire year 2021, despite the inflated economic growth figure of 12.3% of GDP, the agricultural sector only obtained a fragile expansion of 2.6%.

It is important to note that during the twelve years prior to the pandemic (2008-2019), agricultural sector growth averaged 4.5% annually.

The highest level occurred in 2009, reaching 10.2%, which accounted for nearly 70% of GDP growth that year. It was a true golden age for the national agricultural sector, which corresponded to the slogan that eating comes first.

However, as of 2013, the incidence of this sector in the composition of the gross domestic product plummeted, reaching only 1.8% in 2015. Over the next three years, it gradually recovered to 4.2% by 2019.

By 2021, even with a statistical rebound of 12.3% GDP growth, the agricultural sector accounted for only 1.1% of that growth, one of the lowest rates in national history.

For the months of January through April of this year, 2022, the results of national agricultural growth are no more promising than those of last year. On the contrary, they are extremely discouraging. It was only 1.5%; and for the month of April, unfortunately, 0.2%.

If the numbers speak eloquently enough, it is evident that there is a notable neglect on the part of the current national authorities, at a time of world and national crisis, with respect to a priority sector for the development of our country, such as agriculture and livestock.

At this time, we must understand that food sovereignty and security are of the first order to ensure the survival of the national population. Not to understand this is to lead the Dominican people towards hunger, ruin and misery.

New realities
During the first four months of 2021, the tourism sector, as we have already said, had not yet begun its full recovery process. Airports were empty. The skies were clear. The sector was down -23.3%.

But, due to the relaxation of confinement, savings, stimulus policies and the desire to travel and reconnect with nature, the number of tourists began to grow dramatically, reaching a year-on-year growth of 39.9% during the months of January to April of this year.

It is, however, the only sector that is still growing, after the beginning of the economic reactivation stage. In local manufacturing, for example, there has been a decrease from 14.5% last year to 4.4% at present. In free trade zones, from a boom of 23.1%, it is now down to 8.2%.

What has happened in the construction sector is striking. After being sky high, with 53.1% in the first four months of last year, it is now down to 4.6%.

In the area of remittances, although they are still relatively high, during the months of January to April of this year, they have already experienced a decrease of 253 million dollars, equivalent to 8.2% with respect to the same period last year.

In summary, what we want to express is that the figures for the first four months of this year already show a slowdown with respect to 2021. This is essentially due to two reasons.

The first has to do with the change of monetary and fiscal stimulus policies, by the United States and our own authorities, for one of increasing interest rates and decreasing liquidity in the financial markets, as a way to combat inflation.

The second, of a geopolitical nature, corresponds to Russia’s war in Ukraine, which generates the high prices of fuels, commodities and fertilizers.

The fear is that the first of these policies will produce a recession; the second, that it will maintain inflation.

The worst-case scenario is that stagflation will emerge.

In any case, it is important to understand that, due to a combination of external and internal factors, our economy is ambivalent, navigating in a new, confusing and uncertain reality.

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