Economist and professor Pavel Isa Contreras, a researcher at the Santo Domingo Technical Institute (Instituto Tecnológico de Santo Domingo – INTEC), estimates a third of the Gross Domestic Product (GDP) is at risk from the Covid-19 pandemic. Isa Contreras said the economy stands to lose US$28 billion in losses from international trade in goods and services. Isa Contreras spoke during a webinar on “Economic Implications the Coronavirus Covid-19 will have in the Dominican Republic” organized by INTEC.
Others participating in the webinar included Rafael Espinal, dean of Economics at INTEC; Juan Manuel Sontag, director-general of Economic and Social Development at the Ministry of Economy, Planning and Development (Mepyd); Richard Medina, director of the ministerial cabinet and financial advisor to the Ministry of Hacienda; and Magdalena Lizardo, executive director of Grupo de Consultoría Pareto and Professor of Economics and Business at INTEC. The activity was moderated by Armando Barrios, dean of the Economics and Business Area of INTEC.
The Dominican economy is linked to international trade with national exports (US$4.4 billion), for 17% of current income; export free zones (US$5.7 billion) for gross exports, 23% of balance of payments income; approximately US$8.5 billion in services, of which US$7.5 billion come from tourism, for 33% of current income; and remittances US$6.4 billion, 25% of current income, he explained.
Isa Contreras said that clearly the greatest impacts of the pandemic around the world will be in economies, such as the Dominican economy, that are more dependent on trade, tourism and services, compared to economies that are inserted in international trade through the production and placement in the markets of goods.
Rafael Espinal, coordinator of the university’s School of Economics, pointed out that the sacrifices need to be shared by all. He remarked that at present private sector employees are suspended, while public employees are not. For the same reason, he said the Dominican government has to consider decreasing salaries for public employees that make high wages.
“The government does not have the capacity to maintain a social assistance program and keep the public payroll intact. There are employees who have a certain level of salary that could be cut temporarily to make public spending more flexible, in those workers who earn salaries over 200,000 pesos, make proportional cuts to be used to boost health and social program spending,” Espinal said.
In addition, he highlighted as challenges for the government food security, plans to support agricultural production, programs to include informal sector workers in the governmental Employee Solidarity Assistance Fund (FASE) program and social assistance programs.
Economist Magdalena Lizardo warned that the Dominican population is vulnerable. She explained that by 2019 about 2.1 million people were living in a state of poverty, and approximately 248,000 people were living in extreme poverty. The INTEC professor pointed out that so far around 60,000 companies have furloughed workers. Around 37,000 of these companies, or 40%, have applied for the FASE program that is open to companies paying into the Social Security Treasury. Workers with suspended contracts amounted to over 655,000. She wondered what will happen when the two months of unemployment support ends at the end of May.
Richard Medina, director of the ministerial cabinet and financial advisor to the Ministry of Hacienda, explained the focus of the government was on containing the disease, preventing a collapse of the health system, and mitigating damage to the economy with measures targeting companies and individuals. “At the level of companies we have three main areas: fiscal, credit and monetary. At the individual level, the Stay at Home and FASE programs were launched,” explained the official.
On the individual level, the government is increasing welfare funds from RD$1,500 to RD$5,000 a month to those who have the Comer es Primero card. The government announced it is increasing the number of the welfare cardholders from 850,000 to 1.5 million households. “I understand that what the government is seeking is to be as prudent and austere as possible, while trying to maximize the number of people receiving some kind of support,” he said, while clarifying that it is working within the limits established in the National Budget.
In addition, Juan Manuel Sontag, director general of Economic and Social Development at the Ministry of Economy, Planning and Development (Mepyd), said the measures taken by the government seek to ensure that people can keep their jobs, that households have minimum income levels for basic expenses and that companies, especially MSMEs, have liquidity to pay for basic services and try to ensure that the crisis does not go from economic to financial.
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13 April 2020