After the first half of 2023, it is time to look at what challenges the Dominican economy has overcome and what challenges still need to be faced. According to economist Richard Medina, to date, the main focus should be on unemployment and the power sector.
“At the level of challenges facing the economy now, I would say there is still a lot of weakness in these two aspects,” he said in the framework of the “Economic News and Expectations at the End of 2023” panel co-hosted by the Institute of Technology of Santo Domingo (Intec). Eldinero.
Job creation
According to the economist, although job creation in the labor market recovered in the first quarter of 2023 compared to the first quarter of 2019, the year before the pandemic, there are still jobs to be recovered in the formal sector of the economy.
According to data from the central bank, 4,648,638 people were employed in the January-March 2019 period, while in 2023, the figure is expected to increase by 2.58% to 4,768,740.
However, looking at the numbers, he points out that there is still work to be done in the formal sector of the economy. In 2019 that indicator was 2,242,559, this year it was just 2,229,902 for a variation of -0.58%.
“Many people of working age still need recovery, but for various reasons are inactive, or not actively looking for work,” he adds. In this sense, it maintains, a two-thirds (2/3) increase in the number of working-age people between 2019-2023, “is a very important number sitting at home not looking for work.”
Electricity Department
According to Medina, there is another challenge that is always common. It is the power sector. “I think it shows no sign of improvement, there are many investment opportunities, especially the interruption of losses, increased collection levels, investment in the rehabilitation of circuits”, he points out.
He lamented that this year and the previous year, the current transfers from the central government in the power sector cost around US$ 1.2 billion to US$ 1.4 billion. He says it will be much higher at 1% to 1.3% of the gross domestic product (GDP).
Even so, he explains, it should be taken into account that this pillar of the economy consists of three sectors: electricity production or manufacturing. “There aren’t many situations for this, because usually, someone comes along, builds a plant, which is now solar or wind farms, and it starts generating electricity,” he commented. However, he adds, the problem in the Dominican Republic is the need for long-term base energy.
“The government contract, a barge, has now tendered for 800 MW. Manzanillo is also available, but if they can get it off the ground, it will take some time. “There are some minor issues with the natural gas issue that make it impossible,” he highlighted.
The other element is the transmission or high voltage lines that carry the electricity from the voltage to the substations. “There aren’t many problems,” he adds, because these Dominican companies, according to their collections, make investments. On the other hand, the distribution segment has losses which he described as very high.
“The current problem for the power sector on the distribution side is non-payment, the government comes and checks the power distribution companies every month,” he says. In this sense, he explains, the challenge is not to accustom society to this state.
“We see this as normal, not normal in the electricity market. Distribution companies have to charge their customers and have the ability to pay the generators that have to pay the electricity,” he explains.
He understood that the current situation might discourage new players from building a high-capacity plant. “It’s something that’s been going on for 30 or 40 years. Before it was in the hands of the government with CDE, it was in the hands of the private sector and returned to the government. Nothing worked,” he says.
He concluded his address on the subject by noting that providing solutions to the energy problem is a socio-political decision. He also pointed out that an answer must be sought because the current transfers cost Dominicans “a lot of money” every year.
