Dominican Republic

Recovery that began in 2026 is expected to gain momentum in 2027

Growth rebounded in 2026 after slowing in 2025 on back of a less favourable international environment, a downturn in the construction sector and the effects of Hurricane Melissa.

In 2027, economic activity is expected to continue growing and will remain primarily driven by private consumption (68% of GDP). After welcoming 11.7 million visitors in 2025 (up 4.3% year-over-year), the country clocked up 6.6 million arrivals between January and June 2026 (up 7.7% year-over-year). The sector (15% of GDP) will support consumption, but to a lesser extent than in 2026, as the US economy—the main source market accounting for more than half of all arrivals—has reached a steady pace. Remittances (representing 9.2% of GDP in 2025) will also fuel household consumption. After growing by 10.3% in 2025, remittances increased by 5.4% year-over-year between January and May 2026, against the backdrop of tighter US immigration policies and the introduction in January 2026 of a remittance tax. Some 1.3 million Dominicans reside in the US (generating 85% of total remittances), with the majority (83%) residing there legally. At the same time, since cutting its benchmark rate twice in September and October 2025, the Central Bank of the Dominican Republic (BCRD) has kept the rate at 5.25%, considering that inflationary pressures associated with the conflict in the Middle East are temporary. Inflation, even if kept in check by government subsidies, could edge close to the upper end of the target range (4% ± 1 percentage point) through 2027, particularly owing to the high probability of a strong El Niño event beginning in the second half of 2026 and its impact on agriculture. Above all, investment in tourism, infrastructure, and energy will continue to recover, supported by growth in credit to the private sector. In particular, construction will remain robust following its slowdown in 2025, which was linked to tighter immigration controls amid the Haitian crisis, as well as budget execution constraints. Free trade zones will continue to attract American and Spanish investors, thanks to their tax incentives, infrastructure, and competitive labour costs.

Last, the Dominican economy’s dependence on the US—the leading market for the country’s goods exports, accounting for 53.5% of the total in 2025—will leave it vulnerable to changes in Washington’s trade policy. Despite the preferential framework of the CAFTA-DR agreement, Dominican exports are subject to a 10% tariff. However, an ongoing US investigation into forced labour practices could lead to additional tariffs of 12.5%. While exports of textiles and apparel are tariff-exempt (4.2% of the total in 2025, 81% of which are destined for the US), several products from free trade zones (medical devices, jewelry, cigars) are at risk. This could reduce the competitiveness of these sectors, 72.2% of whose production is destined for the US market.

The electricity burden is undermining the path to fiscal consolidation

Presented in October 2025, the 2026 budget is part of a path of gradual fiscal consolidation guided by the Budget Responsibility Act passed in July 2024. The Act introduced a 3% cap on real expenditure growth and aims to stabilise public debt at 40% of GDP by 2035. The budget calls for a moderate increase in capital expenditures (2.5% of GDP), the continuation of major infrastructure projects (the Santiago monorail, the Santo Domingo metro extension), and a focus on social spending (46% of total expenditures). Initially based on an oil price scenario of $65 per barrel and a gradual reduction in energy subsidies, the budget was adjusted in response to rising energy prices caused by the conflict in the Middle East. Since March 2026, the authorities have strengthened support measures, combining increased subsidies for electricity distributors and fuel, a freeze on fertiliser prices and targeted measures for vulnerable households. Fuel subsidies (approximately $0.3 billion already committed as of early June) could reach $0.8–0.9 billion for the year, but remain lower than those in the electricity sector, which is structurally in deep deficit due to insufficient revenue collection and underpricing. The transfers included in the 2026 budget—intended to cover the electricity utilities’ deficit and limit rate increases for households and businesses—amount to USD 1.5 billion (1.3% of GDP). By mid-June, 63% of this allocation had already been used, which could bring the total cost to nearly USD 2 billion for the year. The Abinader administration will seek to reduce losses, notably by encouraging private-sector participation. As a result, the budget deficit will persist in 2026, as increased subsidies will prevent the initial target of 3.2% of GDP from being met. At the same time, a tax reform was enacted in June 2026 to offset the budgetary cost of the energy crisis. It combines permanent measures that include higher taxes on financial transactions, gambling and e-cigarettes, the creation of a tax on airline tickets and a new income tax bracket for high earners, on top of a temporary three-year increase in the corporate tax rate from 27% to 30% applicable to large companies. It also provides for stricter enforcement of tax compliance. The VAT rate and the income tax exemption threshold remain unchanged to limit the impact on the middle class.

The public debt ratio is expected to resume its downward trend from 2027, supported by rising primary surpluses resulting from the fiscal rule. External debt accounts for 75% of the total outstanding debt, and 78% of it is held by private bondholders.

With regard to the external accounts, the current account deficit narrowed in 2025, supported by record tourist arrivals, growth in exports (+6.4% year-over-year) and an increase in remittances. However, this deficit widened in 2026 and is expected to stabilise in 2027. As a net energy importer, the country is being penalised by rising oil prices, while the economic recovery is fueling demand for imports. Furthermore, a possible tightening of US trade policy and the closure of the border with Haiti—the third-largest export market (8.2% of the total in 2025)—will continue to weigh on the trade outlook. This will be partially offset by the resilience of remittances and strong tourism revenues. Furthermore, the mining sector will remain a key driver, with a sharp rise in gold exports in early 2026 (1.05 billion USD between January and April, +113% year-over-year), driven by higher prices and increased production volumes. The current account deficit will continue to be largely financed by FDI, which reached USD 5.3 billion in 2025 (4.2% of GDP), primarily in tourism (26.3%) and energy (23.8%). Last, foreign exchange reserves stood at a comfortable USD 16.1 billion at the end of March 2026 (equivalent to approximately 5.3 months of imports), up from October 2025 (USD 14.7 billion).

Relations with Washington and Haiti are key

Re-elected in the first round of the May 2024 presidential election with more than 57% of the vote, Luis Abinader consolidated his power by securing, with his Modern Revolutionary Party (centre-right), a qualified majority in both chambers of Congress (29 out of 32 seats in the Senate and 147 out of 190 in the House of Representatives). He is ineligible to run again in the next election, which will take place in May 2028. Riding on a majority, the government has passed reforms including the Fiscal Responsibility Act and a constitutional amendment. The amendment has limited presidents to two terms of office, increased the independence of prosecutors, and reduced the number of members of Congress. A reform bill aimed at modernising the Labour Code that dates back to 1992 was presented to Congress in October 2024. It aims to improve working conditions and strengthen protection for domestic workers, but leaves the system of mandatory severance pay unchanged, which is considered rigid and costly for businesses. If the bill is not passed before the end of the session in July 2026, the authorities will have to restart the entire parliamentary process. Furthermore, in October 2024, the Abinader administration was forced to scrap an initial tax reform that was expected to generate 1.5% of GDP of additional revenue. Already watered down, the proposal faced opposition from the public and civil society organisations. However, in the wake of the energy crisis, the government quickly pushed through a more targeted reform, which was enacted in June 2026. Last, drug-related crime, inadequate electrical infrastructure, and issues of governance and corruption remain persistent structural challenges.

The Haitian crisis will remain the primary foreign policy concern. The government intends to uphold its hardline stance on immigration, combining stricter controls, mass deportations (379,553 Haitian nationals were deported in 2025, up 37% from 2024) and border security. The strategy, which enjoys broad public support, is one of the linchpins of the President’s popularity. While the resumption of commercial flights in May 2026 marked the beginning of a period of calm, prospects for normalisation are limited by Haiti’s persistent instability. The Dominican Republic also supports international initiatives, notably the deployment of a UN force to combat gangs.

Last, relations with Washington will remain crucial. The Abinader administration prioritises cooperation on security and migration issues, as illustrated by the access granted to the US to certain air facilities for its regional operations to combat drug trafficking. In May 2026, an agreement was also signed to govern the temporary transfer to the Dominican Republic of a limited number of third-country nationals deported from the US. The Dominican Republic also benefits from US support in the energy and infrastructure sectors, as exemplified by the planned undersea power cable project to Puerto Rico, with construction expected to begin in 2027.

Last updated : June 2026