The Dominican Republic has made remarkable progress in terms of income convergence

By ​Guzmán Ariza, Attorneys at Law

A recent report by the International Monetary Fund (IMF) states that the Dominican Republic has the potential to become an advanced economy in the next 40 years.    

"What is remarkable about the Dominican Republic’s progress is not just the level of convergence but also its speed compared to other countries in the region. By examining the average convergence velocity, or the rate of change in income convergence per decade, it is evident that the Dominican Republic has exhibited the highest average convergence velocity, or blue shift, in Latin America over the past 50 years," says the study published on August 3, 2023, by IMF advisors Frank Fuentes, Emilio Fernández and Alejandro Santos.

The convergence velocity of the country has increased from an average of 3 percentage points per decade over the last 50 years to almost 8 percentage points per decade more recently. This remarkable performance can be attributed to several factors, including implementation of sound policies, particularly by the central bank, improvements in policy framework, a more diversified export base, and the economy’s structural flexibility to changing global conditions.

According to the IMF, over the last half century, the Dominican Republic has transformed, first from a primarily agricultural-based to a more manufacturing-oriented economy supported by the growth of free trade zones, and subsequently to a services-driven economy bolstered by the exploitation of the country’s tourism potential and the expansion of the financial system.

Today, the country maintains a balanced mix of industries and sectors, including agriculture, manufacturing, and services, and boasts the sixth highest per capital GDP in Latin America when accounting for purchasing power, surpassing regional giants like Brazil and Mexico.

Looking ahead, for the IMF there are reasons to believe that the Dominican Republic can sustain its high growth. IMF staff estimates potential growth at 5 percent per year, similar to the average of the last 50 years.

To fuel higher potential growth, the Dominican Republic can:

-Enhance the quality of education to boost workforce productivity; 
-Complete electricity sector reform to improve distribution, eliminate blackouts, and enhance renewable energy adoption; 
-Strengthen the resilience of the tourism and agricultural sectors against natural disasters and climate change; 
-Address labor market informality for better job quality;
-Improve the business climate to achieve investment grade status to attract higher levels of investment; 
-And embrace technology and foster innovation.