Commonwealth of Dominica
Annual Economic and Financial Review: 2022

Overview

• Preliminary estimates indicate that GDP output in the Commonwealth of Dominica expanded for the second consecutive year, post the Covid-19 pandemic.
• The economic expansion was led by a return to growth in the tourism and manufacturing industries, along with greater value added in the agriculture, wholesale and retail trade, and transportation sectors.
• A significant reduction in expenditure was the main factor contributing to an overall fiscal surplus, following a deficit obtained in the previous year.
• Downside risks to near-term growth include an escalation in geopolitical conflicts, a slowing global economy, a surge in global commodity price pressures and climate change risks.

Snapshot of Economic and Financial Developments for 2022 - Commonwealth of Dominica

The Economy (Real Sector)

Real GDP expanded by 5.9 per cent in 2022, following growth of 6.9 per cent in 2021. The economic expansion was reflective of increased value added in all major sectors except construction (Figure 1). The hotels and restaurants sector (tourism) grew at a strong rate of 175.0 per cent in 2022, reversing the contraction of 14.1 per cent in 2021. However, the sector’s direct contribution to GDP is relatively small, accounting for less than 2.0 per cent. Nevertheless, the spill-overs to the wholesale and retail trade; transport, storage and communications; and real estate, rental and business activity were significant, with those sectors reporting expansions of 11.0 per cent, 11.3 per cent and 3.6 per cent, respectively. Collectively these sectors contribute approximately 35.0 per cent of GDP.

Most of this impact stemmed from the stay-over market segment, which saw arrivals of 60,422 compared with 14,728 in 2021. Stay-over arrivals from all source markets grew exponentially, with notable mentions of the United States and French West Indies markets. Despite this significant improvement, the 2022 outturn represented 68.0 per cent of the 2019 pre-pandemic benchmark. The number of cruise ship passengers rose to 180,125 in 2022 from 50,829 in 2021. Similarly, yacht passengers grew to 5,932 in 2022 from 540 in 2021 (Figure 2).

Output in the agricultural sector increased by 5.4 per cent, a much slower pace of growth when compared to 2021, in which the sector grew by 24.4 per cent. The slowdown in the sector reflected a tempering of growth in the banana sub-sector. Manufacturing output rose by 20.0 per cent owing to higher production of soap and beverages. In contrast, the construction sector declined by 2.8 per cent mirroring lower execution of the public sector investment programme and a slowdown in private sector activity.

Consumer Prices

Largely impacted by the uptick in global energy and food prices, estimates of consumer prices, point to an acceleration in the rate of inflation in 2022 to 9.6 per cent, the highest level in 5 years (Figure 3). This represents 6.0 percentage points increase over the comparable period in 2021. The main drivers of inflation were housing, water, electricity, gas and other fuels (14.2 per cent); transport (11.2 per cent), and food (10.9 per cent).

Government Operations

The financial operations of the central government yielded an overall surplus of $63.6m (3.8 per cent of GDP) at the end of the calendar year 2022. This outturn was an improvement from the deficit of $96.4m (6.4 per cent of GDP) recorded in the corresponding period in 2021 (Figure 4). The primary balance followed the same pattern shifting to a surplus of $104.2m (6.3 per cent of GDP) in 2022 from a deficit of $62.4m (4.2 per cent of GDP) in 2021. The improvement in the fiscal balances mirrored expenditure restraint on both current and capital accounts.

The current account surplus fell to $187.7m (11.4 per cent of GDP) at the end of 2022, from $275.6m (18.3 per cent of GDP) at the end of the prior year. The decline in the surplus was attributed to lower non-tax revenue. Non-tax revenue, which constituted 54.0 per cent of current revenue fell by $123.0m to $404.3m (25.0 per cent of GDP) largely due to lower inflows from the Citizen by Investment Programme (93.0 per cent of non-tax revenue). Meanwhile, tax revenue grew by $4.2m to $345.6m (21.0 per cent of GDP) solely resulting from greater tax receipts on goods and services, namely the value added tax (VAT). These revenue movements led to an overall decline in current revenue by $118.8m to $749.9m (45.4 per cent of GDP). Current expenditure declined by $30.8m to $562.2m (30.0 per cent of GDP) largely on account of lower spending on goods and services and personal emoluments. Capital spending fell by $241.6m to $193.1m (11.7 per cent of GDP) at the end of 2022, reflecting lower execution of the public sector investment programme. In the corresponding period, capital grants fell by $2.3m to $60.4m.

Banking Developments (Monetary)

Domestic claims (credit) grew at a decelerated rate of 1.9 per cent to $969.0m in 2022 when compared with a rate of growth of 12.9 per cent in 2021. The growth in credit was led by private sector activity (Figure 6). Claims on the private sector grew by 2.8 per cent to $771.3m associated with increases in the liabilities of both businesses (5.4 per cent) and households (1.0 per cent). Conversely, the Government’s net indebtedness fell by 0.9 per cent to $145.0m as deposits were utilized to reduce outstanding credit.

Currency in circulation and transferable deposits rose by 13.0 per cent and 3.7 per cent, respectively, an indication of greater liquidity in the economy. Meanwhile, other deposits held in national currency fell by 4.6 per cent.

Commercial banks remained highly liquid during the period under review. The total loans to deposits ratio rose to 60.3 per cent from 58.5 per cent in 2021, significantly below the benchmark of 75-85 per cent. The non-performing loans ratio fell to 13.8 per cent in 2022 from 14.4 per cent in 2021 (Figure 7).

External Trade

Driven by higher import values, the merchandise trade deficit expanded by $95.1m to $661.1m in 2022 (Figure 8). Import payments rose by $98.1m to $719.2m associated with higher payments for food, mineral fuels, and machinery and transport equipment. This increase was partly offset by growth in export receipts of $3.0m to $58.2m reflecting greater earnings from soap and paints exports. Meanwhile, on the services account, visitor expenditure rose to $163.3m in 2022, up from $44.5m in 2021 consistent with greater tourist arrivals.

Outlook

The economic outlook for the Commonwealth of Dominica is positive, with the expectation that real GDP will revert to the pre-pandemic level in 2023. The hotels and restaurants sector is projected to remain on an expansionary path, albeit at a less buoyant rate.

Selected Economic Indicators