2017 Index of Economic Freedom

Dominican Republic

overall score62.9
world rank76
Rule of Law

Property Rights56.1

Government Integrity30.9

Judicial Effectiveness25.3

Government Size

Government Spending90.2

Tax Burden84.6

Fiscal Health90.1

Regulatory Efficiency

Business Freedom52.8

Labor Freedom56.2

Monetary Freedom76.7

Open Markets

Trade Freedom77.0

Investment Freedom75.0

Financial Freedom40.0

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Quick Facts
  • Population:
    • 10.8 million
  • GDP (PPP):
    • $149.7 billion
    • 7.0% growth
    • 4.9% 5-year compound annual growth
    • $14,984 per capita
  • Unemployment:
    • 14.4%
  • Inflation (CPI):
    • 0.8%
  • FDI Inflow:
    • $2.2 billion
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Wide-ranging reforms have led to some progress in regulatory efficiency, enhancing the Dominican Republic’s entrepreneurial environment. Gradual economic diversification has strengthened resilience to external shocks. A relatively high degree of openness to global trade has aided the ongoing transition to a modern and competitive economic system, and modest tax rates have encouraged competitiveness.

The Dominican Republic’s record on institutional reform has been uneven, and more vibrant economic growth is constrained by structural weaknesses that continue to undercut some of the four pillars of economic freedom. The rule of law is not strongly sustained by the judicial system, particularly because of growing corruption that undermines government integrity and judicial effectiveness.

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Background

The Dominican Republic has long been viewed primarily as an exporter of sugar, coffee, and tobacco. After its two principal parties entered into an agreement to cooperate and support common candidates, President Danilo Medina of the center-right Dominican Liberation Party took office for a second four-year term in August 2016, and his party retained majority control of Congress. Journalists face intimidation and violence when investigating such issues as drug trafficking and corruption. In recent years, growth driven by mining activity and such service-based sectors as tourism and finance has made the economy one of the most vibrant in the Caribbean.

Rule of LawView Methodology

Property Rights 56.1 Create a Graph using this measurement

Government Integrity 30.9 Create a Graph using this measurement

Judicial Effectiveness 25.3 Create a Graph using this measurement

Private property rights are respected, although enforcement of intellectual property rights is poor. Despite the increasing independence of the judiciary, instances of political influence in decision-making are still evident. Corruption is a serious systemic problem at all levels of the government, the judiciary, the security forces, and the private sector. Institutionalized graft is linked to significant levels of narco-trafficking.

Government SizeView Methodology

The top individual income tax rate is 25 percent, and the top corporate tax rate is 27 percent. Other taxes include a value-added tax, an estate tax, and a net wealth tax. The overall tax burden equals 13.8 percent of total domestic income. Government spending has amounted to 18.1 percent of total output (GDP) over the past three years, and budget deficits have averaged 2.2 percent of GDP. Public debt is equivalent to 34.3 percent of GDP.

Regulatory EfficiencyView Methodology

The cost of completing licensing requirements has been reduced, and the process for launching a business has been streamlined. The nonsalary cost of employing a worker is moderate, but restrictions on work hours are rigid. The Medina government still funds electricity subsidies that are estimated at approximately 2 percent of GDP and has yet to push forward with energy-sector reforms.

Open MarketsView Methodology

Trade is important to the Dominican Republic’s economy; the value of exports and imports taken together equals 54 percent of GDP. The average applied tariff rate is 6.5 percent. In general, the government does not discriminate against or screen foreign investment. The small financial sector has been consolidated, but confidence in banking has been unsteady. Capital markets are underdeveloped, and long-term financing is hard to obtain.

Country's Score Over Time

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Regional Ranking

rank country overall change
1Canada78.50.5
2Chile76.5-1.2
3United States75.1-0.3
4Colombia69.7-1.1
5Uruguay 69.70.9
6Jamaica 69.52.0
7Peru68.91.5
8Panama 66.31.5
9Saint Vincent and the Grenadines65.2-3.6
10Saint Lucia65-5.0
11Costa Rica 65-2.4
12El Salvador 64.1-1.0
13Dominica63.7-3.3
14Mexico63.6-1.6
15Guatemala 631.2
16Dominican Republic62.91.9
17Paraguay 62.40.9
18Trinidad and Tobago61.2-1.7
19The Bahamas61.1-9.8
20Nicaragua 59.20.6
21Honduras 58.81.1
22Belize58.61.2
23Guyana58.53.1
24Barbados54.5-13.8
25Brazil52.9-3.6
26Argentina50.46.6
27Haiti49.6-1.7
28Ecuador49.30.7
29Suriname48-5.8
30Bolivia47.70.3
31Cuba33.94.1
32Venezuela 27-6.7
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