Commonwealth of Dominica
Economic and Financial Review: 2022 Half-Year (2022H1)

Overview

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The Economy (Real Sector)

Economic activity in Dominica is estimated to have increased at an accelerated pace in the first half of 2022, relative to the corresponding period in 2021. Economic advancement primarily stemmed from tourism activity and its supporting sectors of wholesale and retail trade; transport and storage; and real estate, renting and business activities. Activity in the tourism industry rose sharply during the first six months of 2022.

The total number of visitor arrivals surged to 121,442 from 4,963 at the end of June 2021 reflecting a resumption of cruise tourism and stronger stay-over arrivals. Cruise passengers totaled 97,319. Stay-over arrivals increased to 20,983, up from 4,634 one year earlier. Yacht passengers amounted to 3,071 from 316 in 2021.

Fig 1: Visitor Arrivals to the Commonwealth of Dominica by Category.

The agricultural sector is also estimated to have registered an increase in the first half of the year, as banana production rose by 4.2 per cent. Other crops and livestock were also estimated to have increased. Manufacturing output was mixed as increases in soap production (84.8 per cent) and beverages (1.8 per cent) were offset by a decline in paint production (15.1 per cent).

Conversely, activity in the construction sector is estimated to have contracted as evidenced by a 62.9 per cent reduction in public sector capital investment as some major projects came to an end. There was also a 47.4 per cent decline in private sector -residential and commercial - construction starts.

Consumer Prices

The rate of inflation (period average) accelerated in the first half of 2022, rising to 6.11 per cent from 0.5 per cent a year prior (Figure 2). Global increases in food and oil prices effectuated higher domestic price indices of housing, utilities, gas, and fuels (13.6 per cent), food (5.7 per cent) and transport (1.8 per cent).

Fig 2: Trends in Period-Average Inflation.

Government Operations

The fiscal operations of the central government resulted in an overall surplus of $113.1m in the first half of 2022, a significant improvement from a deficit of $69.3m recorded in the corresponding period of 2021 (see figure 3). Similarly, a primary surplus of $135.0m was realized.

Fig 3: Trends in Fiscal Balances

The improvement in the fiscal balances was underpinned by a sharp reduction in capital outlays. Capital expenditure declined by 62.9 per cent to $133.0m as works on a number of projects slowed while others concluded. Meanwhile, capital grants rose to $49.0m from $26.0m in June 2021, reflecting receipts from bilateral and multilateral partners.

On the current account, a surplus of $196.9m was recorded, approximately 25.0 per cent lower than the level obtained in June 2021. Current revenue fell by 6.2 per cent to $536.8m mainly attributable to a contraction in non–tax revenue ($44.2m). Receipts from the Economic Citizenship Programme (ECP) fell by 10.6 per cent to $340.5m, contributing to the fall in non-tax revenue. By contrast, tax revenue rose by 5.0 per cent ($8.6m), associated with higher receipts from taxes levied on domestic goods and services, and international trade and transactions.

Current expenditure rose by 9.9 per cent to $339.9m largely on account of greater spending on goods and services ($22.3m); personal emoluments ($6.2m); and interest payments ($6.3m). The significant increase in expenditure on goods and services was mainly related to due diligence for the ECP.

Fig 4: Trends in Composition of Revenue and Expenditure

Banking Developments (Monetary)

Domestic claims (credit) grew by 4.9 per cent to $894.5m. This was led by an increase in Government’s net indebtedness, which rose by $37.6m on account of a decline in deposits. Claims on the private sector grew marginally by 0.9 per cent to $753.2m. The expansion in private sector claims (credit) reflected an increase in credit to business sector (0.6 per cent) and to households (1.1 per cent). Total deposits rose by 1.9 per cent consistent with greater economic activity and money creation.

Fig 6: Trends in Domestic Deposits

The banking sector remained highly liquid. The lending capacity of commercial banks rose as the total loans to deposits ratio fell by 3.2 percentage points to 54.5 per cent, significantly below the benchmark of 75-85 per cent. The non-performing loans ratio remained elevated at 14.3 per cent exceeding the ECCB’s prudential limit of 5.0 per cent (Figure 7).

Fig 7: Trends in Non-Performing Loans Ratio

External Trade

The merchandise trade deficit expanded by 8.9 per cent to $291.7m in the first half of 2022. This outcome was driven by an increase in import payments by 10.4 per cent to $319.5m related to higher import prices for food, fuel, and machinery and transport equipment. Receipts from exports increased by 29.4 per cent to $27.8m mirroring gains from the export of paints, soap and bananas. Gross travel receipts are estimated to have risen to $61.5m from $14.1m in June 2021 as visitor arrivals rose.

Fig 8: Selected Components of External Trade

Outlook

Economic activity is expected to remain buoyant in the remainder of 2022, based on anticipated positive developments in key sectors.

Selected Economic Indicators