Home Economics, Policy & Regulation Country Report: The Dominican Republic Is on the Rebound
Author: Nic Wirtz | Photos: Shutterstock
The island republic is bouncing back from a difficult 2025, and investor confidence is high; however, structural issues remain.
This article appears in the July/August issue of Global Finance Magazine.
Looking to bounce back after a disappointing 2025, the Dominican Republic’s economy still faces significant hurdles, including the conflict in the Middle East and internal challenges such as external debt, funding for old-age benefits, and the need to invest in innovation and human capital.
The Iran war and the ensuing rise in gas prices will cost the Caribbean country at least $900 million more than it had previously budgeted, according to May estimates from the Central Bank of the Dominican Republic (BCRD). A revised budget was due to be presented to Congress in late June, but rising gas prices complicated the picture.
“We are all going to have to pay for the crisis in one way or another,” Minister of Finance and Economy Magín Díaz warned last month in a television interview.
In April, year-over-year inflation reached 5.11%, the highest level since 2023 and above the BCRD’s 4% to 5% target. Market consensus and official projections expect inflation to end the year around 4.5% as international supply conditions gradually normalize.
“The geopolitical crisis in the Middle East has had an indirect yet significant impact on the Dominican economy,” says Alejandro Arredondo, an economist at the Universidad Autónoma de Santo Domingo (UASD), “primarily through international energy prices, logistics costs, and heightened global financial uncertainty.”
According to the BCRD, real GDP growth in 2025 was 2.1%, less than half of the long-term potential growth, which has averaged 5% over the past six decades. The slowdown is attributed to weaker domestic demand and the postponement of private investment projects. Multiple attempts at tax reform have failed, creating uncertainty among economic actors.
The fuel crisis adds to existing pressures. Construction accounts for about 12% of total GDP, but when combined with mining, manufacturing, commerce, transportation, and informal work, the share approaches 20%. The construction sector ended 2025 with five consecutive trimesters of negative growth.
Business intelligence consultant Henri Hebrard blames expensive raw materials, high interest rates, and the return of Haitian workers to their home country for construction’s underperformance in 2025. However, in the first quarter of this year, the sector rebounded, growing by 4%, in part because delays in approving mining and construction permits eased. The Ministry of Housing, Habitat, and Buildings issued 93% more building permits in the first quarter of this year compared with the same period in 2025, enabling $3.9 billion in new construction investment.
“[Construction] is the reason for the bad performance of the Dominican Republic in 2025, and it will be the same reason that explains why there will be a rebound this year,” says Hebrard. “As Charles de Gaulle said, ‘If construction is good, everything is good.’”
Tourism has also maintained strong momentum, with value added by hotels, bars, and restaurants rising 5.9% in the first quarter. That period saw 2.6 million tourists arrive by air; March had a record 900,000-plus air passengers.
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