2020 Index of Economic Freedom

Dominica

OVERALL SCORE60.8
WORLD RANK97
Rule of Law

Property Rights59.8

Judicial Effectiveness62.6

Government Integrity51.2

Government Size

Tax Burden70.5

Government Spending16.0

Fiscal Health86.2

Regulatory Efficiency

Business Freedom70.4

Labor Freedom60.7

Monetary Freedom83.5

Open Markets

Trade Freedom68.4

Investment Freedom70.0

Financial Freedom30.0

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Quick Facts
  • Population:
    • 0.1 million
  • GDP (PPP):
    • $0.7 billion
    • -12.0% growth
    • -2.8% 5-year compound annual growth
    • $9,886 per capita
  • Unemployment:
    • 0.0%
  • Inflation (CPI):
    • 1.4%
  • FDI Inflow:
    • $-37.2 million

Dominica’s economic freedom score is 60.8, making its economy the 97th freest in the 2020 Index. Its overall score has decreased by 2.8 points due to a steep decline in the government spending score. Dominica is ranked 20th among 32 countries in the Americas region, and its overall score is above the regional average and slightly above the world average.

For the most part, Dominica’s economy has languished at the lower end of the moderately free category since the beginning of Index scoring of the country in 2009. Significantly negative GDP growth in 2018 tracks with this relatively poor performance on economic freedom and also reflects both the massive impact of storm damage on the economy and the high cost of recovery.

To expand economic freedom in Dominica, the government should lighten its regulatory footprint in the financial services sector, reduce its intervention in banks and other financial firms, and cease any efforts to influence the allocation of credit.

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Background

A small and mountainous island in the Lesser Antilles, Dominica is a member of the Organization of Eastern Caribbean States (OECS). Prime Minister Roosevelt Skerrit of the Dominica Labour Party has been in office since 2004 and may run for a fourth term in December 2019. Historically, the economy has depended on agriculture (primarily bananas) and tourism. The government’s efforts to promote diversification have led to creation of an offshore medical education sector and have encouraged investments in such agricultural exports as coffee, patchouli, aloe vera, exotic fruits, and cut flowers. Devastation from Hurricane Maria, which destroyed much of the country’s agricultural sector and damaged its transportation and physical infrastructure in 2017, has stressed the government’s already fragile finances.

Rule of LawView Methodology

Property Rights 59.8 Create a Graph using this measurement

Judicial Effectiveness 62.6 Create a Graph using this measurement

Government Integrity 51.2 Create a Graph using this measurement

Although private property rights are generally respected, ease of property registration is ranked very low by the World Bank. The judiciary is independent and based on English common law. Appeals are heard by the inter-island Eastern Caribbean Supreme Court. Corruption is not a major problem, although some officials reportedly engage in corrupt practices with impunity. Nonbank financial institutions are monitored to combat money laundering and terrorist financing.

Government SizeView Methodology

The top individual income tax rate is 35 percent, and the top corporate tax rate is 30 percent. Other taxes include value-added and environmental taxes. The overall tax burden equals 28.7 percent of total domestic income. Government spending has amounted to 52.9 percent of the country’s output (GDP) over the past three years, and budget deficits have averaged 0.4 percent of GDP. Public debt is equivalent to 83.1 percent of GDP.

Regulatory EfficiencyView Methodology

Dominica is ranked higher than the regional average in the World Bank’s 2019 Doing Business Survey but lags behind in measures related to registering property, getting credit, and resolving insolvency. Waivers and exceptions regarding the application of labor laws are not granted. Government expenditures to repair hurricane damage to state-owned electricity, water, and sanitation infrastructure continued to outpace revenues in 2019.

Open MarketsView Methodology

The total value of exports and imports of goods and services equals 118.2 percent of GDP. The average applied tariff rate is 8.3 percent, and two nontariff measures are in force. Gradual reform has improved the overall investment framework over the years, but the financial sector remains underdeveloped. Shallow markets and a lack of available financial instruments restrict overall access to credit.

Country's Score Over Time

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Regional Ranking

RANK COUNTRY OVERALL CHANGE
1Canada78.20.5
2Chile76.81.4
3United States76.6-0.2
4Colombia69.21.9
5Uruguay 69.10.5
6Jamaica 68.5-0.1
7Saint Lucia68.2-0.5
8Peru67.90.1
9Panama 67.20.0
10Saint Vincent and the Grenadines66.81.0
11Mexico661.3
12Costa Rica 65.80.5
13The Bahamas64.51.6
14Guatemala 641.4
15Paraguay 631.2
16El Salvador 61.6-0.2
17Barbados61.4-3.3
18Honduras 61.10.9
19Dominican Republic60.9-0.1
20Dominica60.8-2.8
21Trinidad and Tobago58.31.3
22Belize57.42.0
23Nicaragua 57.2-0.5
24Guyana56.2-0.6
25Brazil53.71.8
26Argentina53.10.9
27Haiti52.3-0.4
28Ecuador51.34.4
29Suriname49.51.4
30Bolivia42.80.5
31Cuba26.9-0.9
32Venezuela 25.2-0.7
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