Nice People Networking

Foreigners own 58% of Dominican GDP

SANTO DOMINGO. It is known that the Dominican economy is a net debtor with the rest of the world, while non-residents have rights on financial assets far above what the residents have on foreign financial assets. Nonetheless, until recently it had not been revealed the size of these overseas obligations, which as of 31 December 2012 was 58.1% of the Gross Domestic Product (GDP).

Recently the Central Bank published the document “Implementation of the Sixth Manual of Balance of Payments and the Position of International Investment of the International Monetary Fund in the Dominican Republic”. Starting with its application, the monetary agency divulges new statistics that reflect “what the economy has and what it owes.”

And the series that the institution is publishing reveals that since 2005 the Dominican economy owes more each year. The indicator that measures the balance of financial assets and liabilities is called “The Position of International Investment” (PII). According to this, in 2005 the Dominican Republic owed 33.7% of its GDP, and is 2012, this negative balance went up to 58.1%.

A positive aspect is that part of this “debt” corresponds to direct foreign investments (DFI) which has been growing, from 34% to 42% of GDP.

The direct foreign investment creates companies and jobs, and in the majority of the cases, it generates hard currency for the country.

But it has also happened that the investment portfolios (also known as “flighty” or “hot money” capital because of the ease with which it comes and goes), after falling from 9.6% of GDP in 2007, continued growing until it reached 7.7% of GDP in 2012.

The Central Bank explains that the PII is “one of the fundamental indicators for evaluating the overseas position of a country.” They add that the global financial crisis of 2008 put into evidence the need of the PII in order to “identify macro-economic vulnerabilities that allow us to avoid any attack on financial stability.”

Other liabilities, such as the overseas commercial credits and loans, in 2012 added up to US$16.06 billion, which, together with the investment portfolio, is equal to 35% of GDP. The greater the negative balance of the indicator is, the higher is the probability of financial risk.

Overseas risks

In July 2013, Standard & Poor’s confirmed the sovereign for the country as “B+” stable, which reflects the combination of persistent fiscal and overseas deficits and weak institutions, together with its growth.

Source: Diario Libre

Category: DR News |

Leave a comment

You must be logged in to post a comment.

Last updated October 21, 2016 at 11:57 PM
stats for wordpress
View Statistics Report
Facebook Twitter