Social and Economic Impacts of the COVID-19 and Policy Option in the Dominican Republic

Abstract

The COVID-19 pandemic poses significant challenges for the Dominican Republic, including the loss of foreign exchange earnings due to the reduction of key activities such as tourism, the shutdown of a large part of economic activities with direct and indirect effects on employment and household income, and fiscal challenges, as the government is implementing crisis relief measures at the same time as it sees the tax revenue falls. This document presents a description of the current situation of the economy and the policies that the government has implemented since mid-March, analyzing their relevance, evaluating their fiscal balance, and proposing additional measures. Finally, a simulation exercise of the impact of the implemented programs on the poverty rate is carried out. The results show that the government's policy package, by focusing part of the subsidies on poor and vulnerable households, can play an important role in containing the increase in poverty, but targeting employment subsidies on formal workers would especially benefit wealthier households.