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The Dominican economy was traditionally dominated by agriculture – primarily bananas – for many decades, however, it has increasingly become driven by tourism, as the government continues to promote Dominica as an “ecotourism” destination. The country boasts of lush vegetation and rich indigenous culture. Unfortunately, Hurricane Maria, which passed through the island in September 2017, destroyed much of the country’s agricultural sector and caused billions of dollars in damage including to all the country’s transportation and physical infrastructure.
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Before Hurricane Maria, the government had attempted to foster an offshore financial industry and planned to sign agreements with the private sector to develop geothermal energy resources. At a time when government finances are fragile, the government’s focus has been to get the country back in shape to service cruise ships. The economy contracted in 2015 and recovered to positive growth in 2016 due to a recovery of agriculture and tourism. Dominica suffers from high debt levels, which increased from 67 percent of GDP in 2010 to 77 percent in 2016.
The country’s GDP is estimated to have contracted by 11 percent in 2020 and has shown a modest recovery of 3.7 percent in 2021 underpinned by a sharp reduction in tourism and related sectors, plus the Covid-19 outbreak that forced a lockdown in August 2021. Since March 2020, the government had a swift reaction to the pandemic by carrying out health spending and social transfers. However, the estimated public debt increased to 106 percent of GDP in 2020 with higher official borrowing.
In this context, the current account deficit is estimated to have widened in to near 30 percent of GDP, underpinned by the loss of tourism exports and increase in imports related the public investment, and the increase in commodity prices—albeit contained by a decline in private demand for imports.
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