2013 Index of Economic Freedom

Dominica

overall score63.9
world rank64
Rule of Law

Property Rights60.0

Freedom From Corruption52.0

Limited Government

Government Spending50.1

Fiscal Freedom72.0

Regulatory Efficiency

Business Freedom77.0

Labor Freedom68.8

Monetary Freedom85.3

Open Markets

Trade Freedom74.3

Investment Freedom70.0

Financial Freedom30.0

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Quick Facts
  • Population:
    • 0.1 million
  • GDP (PPP):
    • $1.0 billion
    • 0.5% growth
    • 2.3% 5-year compound annual growth
    • $13,816 per capita
  • Unemployment:
    • 23.0%
  • Inflation (CPI):
    • 2.3%
  • FDI Inflow:
    • $24.9 million
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Dominica’s economic freedom score is 63.9, making its economy the 64th freest in the 2013 Index. Its overall score is 2.3 points higher than last year, with improvements in half of the 10 economic freedoms, including investment freedom, labor freedom, and the control of government spending. Dominica is ranked 12th out of 29 countries in the South and Central America/Caribbean region, and its overall score is above the world average.

Dominica registered the third largest score increase in the 2013 Index. Reform, however, has progressed unevenly. The foundations of economic freedom remain fragile due to a weak judiciary and persistent corruption. Despite some progress, inefficient and high public spending is a considerable fiscal burden for the population and increases the political system’s vulnerability to outside pressure.

Reforms in recent years, including simplification of the business start-up process and reduction of the corporate tax rate, have contributed to improving the overall investment framework. However, policies to open markets further have not been advanced, and the lack of access to long-term financing prevents more dynamic economic expansion.

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Background

Dominica has a unicameral parliamentary government with a president and prime minister. Labour Party Prime Minister Roosevelt Skerrit took office in 2004. In 2008, the government joined Hugo Chávez’s Bolivarian Alternative for the Americas (ALBA), a trade organization consisting of socialist Latin American governments. Its “ECOALBA” agreement threatens to undo progress in deepening free-market democratic institutions and regional integration made by the Caribbean Community (CARICOM). In 2010, Dominica entered into an economic union with other members of the Organization of Eastern Caribbean States. Bananas, citrus, coconuts, coconut soap, and cocoa dominate the economy, and nearly one-third of the labor force works in agriculture. The government has tried to diversify agriculture by encouraging investments in coffee, patchouli, aloe vera, exotic fruits, and cut flowers. The rugged mountains and rain forests attract some ecotourists.

Rule of LawView Methodology

Property Rights 60.0 Create a Graph using this measurement

Freedom From Corruption 52.0 Create a Graph using this measurement

Dominica has an efficient legal system based on British common law, and private property rights are generally respected. The judiciary is independent, and public trials are considered fair. There are criminal penalties for official corruption, but the law is not implemented effectively. Pirated copyrighted material is sold openly. Monitoring of non-bank financial institutions needs to be strengthened to deter money laundering.

Limited GovernmentView Methodology

The top income tax rate is 35 percent, and the top corporate tax rate is 30 percent. Other taxes include a value-added tax (VAT) and an environmental tax. The overall tax burden equals 26 percent of GDP. Government spending amounts to 40.8 percent of total domestic output. The budget balance has been in deficit, and public debt is equivalent to 70 percent of GDP. Debt and stimulus spending continue to undermine fiscal discipline.

Regulatory EfficiencyView Methodology

Launching a business takes only five procedures, and no minimum capital is required. The cost of obtaining necessary permits has been reduced to less than 10 percent of the level of average annual income. The non-salary cost of employing a worker is moderate, but the labor market lacks flexibility in other areas. Inflation is low, and efforts to eliminate price controls are ongoing.

Open MarketsView Methodology

Dominica’s relatively high average applied tariff of 7.9 percent and myriad non-tariff barriers discourage dynamic growth in trade. Foreign investors generally receive national treatment and may hold up to 100 percent ownership of firms. Administration of the investment regime remains bureaucratic. The financial sector remains underdeveloped. Shallow markets and a lack of available financial instruments restrict overall access to credit.

Country's Score Over Time

Bar Graph of Dominica Economic Freedom Scores Over a Time Period

Country Comparisons

Bar Graphs comparing Dominica to other economic country groups

Regional Ranking

rank country overall change
1Chile790.7
2Saint Lucia70.4-0.9
3The Bahamas70.12.1
4Uruguay 69.7-0.2
5Colombia69.61.6
6Barbados69.30.3
7Peru68.2-0.5
8Costa Rica 67-1.0
9Jamaica 66.81.7
10El Salvador 66.7-2.0
11Saint Vincent and the Grenadines66.70.2
12Dominica63.92.3
13Panama 62.5-2.7
14Trinidad and Tobago62.3-2.1
15Paraguay 61.1-0.7
16Guatemala 60-0.9
17Dominican Republic59.7-0.5
18Honduras 58.4-0.4
19Brazil57.7-0.2
20Belize57.3-4.6
21Nicaragua 56.6-1.3
22Guyana53.82.5
23Suriname52-0.6
24Haiti48.1-2.6
25Bolivia47.9-2.3
26Ecuador46.9-1.4
27Argentina46.7-1.3
28Venezuela 36.1-2.0
29Cuba28.50.2
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