Instituto Tecnológico de Santo Domingo

COVID-19 will have a severe impact on foreign trade in 2020

INTEC research professor, Pavel Isa Contreras, warned that, if national exports fall by 10%, those of free zones by 25%, income from tourism and remittances by 33% and 20%, respectively.

SANTO DOMINGO. Even though that him COVID-19 found the Dominican Republic in a good position in its external accounts due to remittances, tourism, gold exports and low oil prices. impact hot severe from health crisis about him foreign trade and current income.

This is highlighted by External Trade Overviewr number 7 corresponding to the quarter January-March 2020, from Dominican Observatory of Foreign Trade (ODCI), which was presented virtually this Tuesday, April 21.

The document details that, from March, a drastic drop of the ingresos by tourism due to reduced international travel and also a fall in the exports de goods, especially of free trade zone. Research indicates, however, that domestic exports may be the most resilient to the crisis.

Economist Pavel Isa Contreras, who heads the ODCI and presented the report, said that a very significant decrease in imports is expected due to the drastic drop in the level of economic activity and the reduction in oil prices.

“Although it is not yet possible to make projections of the behavior of external income and expenses, it is estimated that, if national exports fall by 10%, those of free zones by 25%, income from tourism and remittances by 33% and 20 %, respectively, the country's total income would decline by nearly 6,000 million dollars, going from US $ 29,000 million in 2019 to US $ 23,000 million in 2020, equivalent to a reduction of more than 20%, ”explained the research professor of the Instituto Tecnológico de Santo Domingo (INTEC).

He indicated that, as a result of the economic depression, imports could be reduced in a 30%, going from $ 20,000 billion in 2019 to $ 16,000 billion in 2020. In addition, the deficit from Current account se would multiply by 2.4, increasing from $ 1,200 billion to $ 2,800 billion.

The ODCI Overview details that the above would mean that, at severe effect that COVID-19 will have on employment, population income, exports, tourism and remittances, it would be necessary to add a possible increase in the external deficit, which it would have to be financed with foreign investment, external credits or with international reserves. If neither happens in the necessary magnitude, there would be no other option than to allow a depreciation of the peso greater than expected.

The Foreign Trade Panorama number 7 also publishes an article by Raúl Octavio Pérez in which, citing international sources, he explains the dimensions of the international economic crisis that COVID-19 is generating in terms of the contraction of economic activity and the International Trade.

The publication also includes an article by Marcelo Salazar, general director of the Directorate of Administration of International Trade Agreements and Treaties (DICOEX) of the Ministry of Industry, Commerce and MSMEs (MICM) which describes the state of the situation of the country's tariff reduction in DR-CAFTA.

This article points out that in 2019 imports of cuts of beef and pork, dairy products, onions, garlic, beans, fruits, sausages and beers finished being liberalized, and that the reduction program will continue for five more years, until 2025, of imports of rice, chicken drumsticks, mozzarella cheese and yogurt.

About ODCI

The ODCI is a permanent academic-institutional space for research, capacity building, service delivery and strategic communication on issues related to foreign trade and its socioeconomic, national and regional impacts. It is made up of business associations such as the National Council of Private Enterprise (CONEP), the Association of Industries of the Dominican Republic (AIRD), the Dominican Association of Free Zones (ADOZONA) and the American Chamber of Commerce (AMCHAMDR), as well as Public institutions linked to international trade such as the General Directorate of Customs (DGA), the Directorate of Administration and Commercial Treaties (DICOEX) of the Ministry of Industry, Commerce and MSMEs (MICM) and the National Council of Export Free Zones (CNZFE) , and INTEC as an academic ally.

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