The World Bank and the United Nations Economic Commission for Latin America and the Caribbean (ECLAC) have reported that the Dominican Republic is one of the Latin American countries best positioned to overcome the coronavirus debacle. These forecast zero growth for the Dominican Republic in 2020.
But local economists Pedro Silverio Alvarez, Ernesto Selman and Alejandro Fernández understand it is unlikely the country will experience a 0% GDP growth rate for 2020. They forecast GDP will fall well below zero in 2020. They highlight the recovery of the tourism industry, the mainstay of local development, may be beyond 2021.
Economic advisor to opposition presidential candidate Luis Abinader, Pedro Silverio Alvarez writes in Diario Libre that there are many reasons to consider that the forecast of the Economic Commission for Latin America and the Caribbean (ECLAC) and the World Bank of zero growth for the Dominican in 2020 are overly optimistic. He writes that ECLAC is estimating that the tourism industry revenues will only drop 30% in 2020 in making its zero growth forecast.
Silverio understands the reality is very different. “The Covid-19 has practically paralyzed the tourism industry at a global scale, as has occurred in our country. There are expectations that its recovery will be a gradual process that will take all of the present year and a part of next year.
95% of the hotels and restaurants in the Dominican Republic have not received new guests since the state of emergency was declared on 20 March 2020.
Because of the size and impact of the tourism industry in the Dominican Republic compared to other Central American countries, Silverio forecasts that the Dominican economy could be the one of the most hardest hit. When the coronavirus pandemic was not part of the equation, ECLAC had forecast a 3.2% growth for the Dominican Republic in 2020, down from 5.5% in 2019.
Economist Ernesto Selman of Crees highlights the impact unemployment and economic collapse in the United States will have on the Dominican economy. Unemployment is forecast to surge to upwards of 15%, compared to 3.5% in 2019. This will considerably affect the flow remittances to the Dominican Republic, a major source of hard currency.
Selman remarks there has been little in the press that the International Monetary Fund (IMF) is forecasting a -5.9% GDP for the US economy, -6.2% for Canada, -5.5% for Russia, -7.2 for France, -7.0% for Germany, -6.5% for the UK, -8% for Spain and -9.1% for Italy, all major source markets for tourists to the Dominican Republic. Selman forecasts the Dominican economy will decline by 10% in 2020.
Economist Alejandro Fernandez is also bearish about the outcome in 2020. He observes in his weekly Argentarium column: “… although certainly both the World Bank and ECLAC are financial agencies with a lot of credibility and technical capacity, they are still quasi-governmental bureaucracies that feed off the statistics and projections of their local government counterparts who, at times like the present, have every incentive to dwarf the economic shock we will suffer.”
In the column, Fernández shares the forecasts from several economic entities for 2020 and 2021 for the Dominican Republic:
Citi (27 March 2020): 2.4% (2020), 4% (2021)
World Bank (12 April 2020): 0.0% (2020), 2.5%) (2021)
Economic Commission for Latin America and the Caribbean (21 April 2020): 0.0% (2020)
International Monetary Fund – IMF (15 April 2020): -1.0% (2020), 4% (2021)
Tower Capital Group (14 April 2020): -1.5% (2020), 6.7% (2021)
Standard & Poor’s – S&P (16 April 2020): -2.0% (2020), 6% (2021)
Banco Centroamericano de Integración Economica – BCIE 1 (2 April 2020): -2.4% (2020)
The Economist Intelligence Unit – EIU (28 March 2020): -3.0% (2020), 2.8% (2021)
BCIE 2 (2 April 2020): -4.8% (2020)
Centro Regional de Estrategias Economicas Sostenibles -CREES -10.0% (2020)
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Diario Libre
Argentarium
CREES
27 April 2020