The International Monetary Fund (IMF) said Saturday that the Dominican Republic is experiencing a remarkable convergence in per capita income, surpassing all other Latin American countries. And it assured that, with the right policies, the country has the potential to become an advanced economy in the next four decades.
“Despite facing challenges, such as the debt crisis of the 1980s, the Dominican Republic’s economy is converging at a faster pace,” the agency states in an article on its official website. “The speed of convergence increased from an average of 3 percentage points per decade over the past 50 years to almost 8 percentage points per decade more recently.”
The IMF attributes this “remarkable performance,” as it defines it, to several factors. “Including the implementation of sound policies, particularly by the central bank. Improvements in the policy framework. A more diversified export base. And structural flexibility of the economy in the face of changing global conditions.”
In examining the average speed of convergence, or the rate of change in income convergence per decade, the IMF notes that the Dominican Republic exhibits the highest average speed of convergence, or “blue shift,” in Latin America over the past 50 years. Countries such as Panama and Chile achieve significant, but even lower, positive convergence speeds.
In terms of income convergence – which is measured by comparing a country’s per capita income with that of a more prosperous nation, often the United States – the IMF notes that the Dominican Republic reached 32 percent in 2022. Which indicates that the country’s standard of living is about one-third that of the United States.
“This contrasts with Latin America as a whole, where the average standard of living is about a quarter of that of the United States. With the right policies, the country has the potential to become an advanced economy over the next 40 years,” the IMF points out.
IMF recommends the country to “prioritize reforms”
The organization adds that, going forward, there is reason to believe that the Dominican Republic can sustain its high growth. The IMF staff estimates a potential growth of 5% per year, similar to the average of the last 50 years.
“To drive higher potential growth, the Dominican Republic can prioritize key structural reforms. This includes improving the quality of education to boost labor force productivity. Also, complete electricity sector reform to improve distribution. Eliminate blackouts and improve the adoption of renewable energy. Strengthen the resilience of the tourism and agriculture sectors in the face of natural disasters and climate change. Address labor market informality for better job quality. Further improve the business climate to achieve investment grade status to attract higher levels of investment. Finally, embrace technology and encourage innovation.”
The IMF insists that while risks lie ahead, particularly those associated with climate change, continued implementation of reforms aimed at boosting productivity can help maintain high growth rates. It would also pave the way for a prosperous future for its people and eventually transform the Dominican Republic into an advanced economy by around 2060. Such progress would represent a significant “blue shift” in the country’s history and serve as undeniable evidence of its continued development.