The numbers have been more positive than projected. After a drop of -6.7% in 2020, the Dominican economy closes 2021 with a growth of around 11% of its gross domestic product (GDP), contrary to the estimates of international organizations that projected it at no more than 9.5%.
And, as the governor of the Central Bank optimistically announced, the country has been one of the fastest growing in the region and with the best relative performance when comparing activity levels with 2019, a pre-pandemic year.
The economic recovery between the pandemic prompted the rating agency Fitch Ratings to upgrade the country’s economic risk outlook from negative to stable. So did Standard & Poor’s (S&P Global), which upgraded the credit outlook from negative to stable.
The positive results of the Dominican Republic’s external sector, reflected in the dynamism of remittances and exports, have contributed to a strengthening of international reserves and consequently to a decrease in exchange rate pressures, notes the Ministry of Economy.
The country managed to maintain a stable exchange rate. The Ministry of Economy estimates that the average exchange rate for 2021 is expected to be around RD$57.30 to the dollar, equivalent to a variation of 1.27% with respect to the 2020 average.
A growing flow of remittances helped to boost the economy, which, according to the Central Bank, will comfortably exceed US$10 billion by the end of December, the highest level ever reached.
In the first 10 months of the year, the free zones reached 180,252 jobs, which represents a growth of 8.4% when compared to the same period of 2020. This number of jobs constitutes a “record number” in the last 17 years, as since 2004 the sector had not surpassed 180,000 direct jobs, according to the statistics, presented by the National Council of Export Processing Zones.
President Luis Abinader is already celebrating the announced investment of more than RD$79,000 million by 64 industries in the coming year, made by the Association of Industries of the Dominican Republic (AIRD).
But 2022 poses a challenge for the country, which closes this 2021 with an accumulated inflation to November of 7.71%. The cost of maritime cargo is projected to continue its escalation in 2022.
The Ministry of Economy estimates that by 2022 favorable economic conditions will be maintained, with an estimated expansion of 5.5 %, approaching the potential growth rate.
However, it specifies that, despite the resilience demonstrated by the Dominican economy, there are still risks in the international environment caused by the COVID-19 pandemic.
“Indeed, imported inflationary pressures associated with rising commodity prices, including oil, as well as from the container crisis and other supply chain disruptions, have been more persistent than initially expected,” he adds.
“By 2022, inflation is projected to gradually converge to the target range of 4 % ± 1 % with inflation at 4.5 % by year-end and 5.0 % for average inflation, as these supply shocks dissipate,” it notes.
Tourism will consolidate
Although the country’s tourism sector was among the economic activities that suffered the most from the impact of the coronavirus in 2020, falling 62.7 % during that year with respect to 2019, it managed to recover part of the flow of tourists this year, a recovery process that the Dominican Republic Association of Hotels and Tourism (Asonahores) is confident will be consolidated in 2022.
“In addition to the recovery of tourist arrivals, we have also seen a notable reactivation in the investment of new hotel projects and complementary offerings, which indicates the confidence we have generated in local and foreign investors. So 2022 is shaping up to be a very positive year for the sector,” said Rafael Blanco Tejera, president of Asonahores.
The effects of the pandemic continue to impact different productive sectors nationally and internationally. In the Dominican Republic, one of them is the agricultural sector, where authorities have had to develop policies to ensure food security in the midst of the expansion of COVID-19.
In addition, the increase in freight, raw materials and fertilizers, the impact of the detection of African swine fever (ASF) in the country and the rise in prices of agricultural products, among others, led the agricultural authorities to implement measures for agricultural recovery.
One of the measures was the “Operational Plan for massive sowing of short and long cycle crops”. To develop it, they had to approve a package of incentives to producers throughout 2021.
The Dominican agricultural sector received more than RD$30 billion in loans to improve and guarantee national production.
Engineer Eulalio Ramirez, deputy minister of Agricultural Production and Marketing of the Ministry of Agriculture, detailed to Diario Libre that this year 2021 more than two million tareas were prepared free of charge, planting material for different types of crops was distributed nationwide and more than RD$8.5 billion was provided at zero rate.
In addition, producers were given support through the Price Stabilization Institute (Inespre) with the commercialization of crops.
“We have maintained the policy of keeping prices stable and that producers have profitability for their activities,” said the deputy minister.
Also, the Dominican Republic’s agricultural exports grew 37% during 2021.
During 2022, the authorities of the Ministry of Agriculture have established to continue with the strategy of guaranteeing food security and self-sufficiency. This, according to Eulalio Ramirez, because maritime cargoes are taking longer than they should and freight rates have increased by more than 300 %.
“All these difficulties indicate that we have to guarantee our food security with our national production,” he said.
In addition, there are plans to continue strengthening beekeeping, aquaculture, sheep and goat sectors, and poultry farming, among others. There are also plans to continue developing projects under public-private alliances.
Towards other markets
The dynamics of international trade is being affected by the pandemic since 2020, producing changes in production costs due to the increase in raw materials, maritime transportation and its duration.
During 2021, the issue of freight rates has been dragging along abrupt movements. Before the pandemic, freight rates were around US$1,300 and US$1,500, and in the blink of an eye they surpassed the US$16,000 barrier.
For Teddy Heinsen, president of the Dominican Republic Shipping Association (ANRD), the next three or four months will see a slight improvement in the reduction of freight rates, perhaps 10% of the current cost, which are between US$15,000 and US$20,000.
“A van from China to here is between US$15,000 and US$17,000. I understand that by the end of the year (2022) there will be many events, such as more ships leaving the shipyards, more containers that will start to be delivered in the middle of the year and, as this comes into circulation, the situation will improve substantially, but I don’t think it will be in the first half of the year,” Heinsen said.
One of the main problems generated by the effects of the pandemic in the maritime sector is the delay of orders, which did not arrive in time for Christmas. In addition, low-value goods purchased in China do not have a real cost for the street because of the freight charges, which make the products too expensive.
Heinsen explained that the cost of freight will depend on each line, but freight rates went up for October because of the late orders in December, but are currently at around US$15,000 or US$14,000.