In 2023, the structure of foreign exchange in the Dominican Republic showed a significant concentration in two sectors: remittances and tourism.
According to an analysis by the Regional Center for Sustainable Economic Strategies (CREES), based on data from the Central Bank of the Dominican Republic (BCRD), the two sources constitute 53.5% of the country’s total foreign exchange earnings.
Remittances last year accounted for 27.3% of the country’s total foreign exchange earnings, a considerable increase driven mainly by the lingering impact of the pandemic.
The phenomenon reflects a trend that has been consolidating in recent years, with remittances from abroad gaining ground over other sources of foreign exchange, such as exports of goods and services. Increased dependence on remittances may pose challenges, as the country becomes more dependent on foreign income instead of encouraging local production and exports, CREES warns.
The tourism sector, another key component in foreign exchange generation, has shown signs of recovery after the setback caused by the pandemic. In 2023, tourism revenues contributed 26.2% of total foreign exchange, a slight increase over the previous year. The growth reflects the effort to revitalize the sector, which has traditionally been one of the Dominican Republic’s economic pillars.
The think tank indicates that “however, not all areas have experienced growth. Free zone exports, for example, have seen a decline in their share of foreign exchange composition, dropping to 21.4%” in 2023.
This represents a continued drop compared to previous years. And it adds that domestic exports have registered a worrisome trend, going from being a crucial element in the generation of foreign exchange to representing only 13.3% of the total in 2023. In 2013, exports constituted 21.5% of total foreign exchange, showing a significant drop in their share. This decline underscores the need for more effective strategies to boost the export of locally produced goods.
On the other hand, foreign direct investment has shown a slight improvement. In 2023, FDI accounted for 11.8% of total foreign exchange, marking a small increase compared to previous years. This increase suggests a growing confidence of foreign investors in the local economy.
Comparison between one and the other; suggestion made
Analyzing the evolution of these indicators from 2013 to 2023 shows that while domestic exports have only grown by 11.7% in that period, remittances have increased by a remarkable 138.3%. “The Dominican Republic should try to take advantage of its privileged position as one of the 20 countries in the world with a trade agreement with the United States, where it should take advantage of the generation of wealth,” CREES posits.
Source:Arecoa.com