June 02, 2026
Dominica’s economy continued to expand in 2025, supported by strong tourism activity and sustained investment in major infrastructure projects. According to the International Monetary Fund’s latest Article IV consultation, real GDP growth accelerated to 4.5 per cent in 2025 from 3.5 per cent in the previous year, reflecting robust economic momentum as the country continued its post-pandemic recovery. Tourism remained a key driver of activity, with visitor arrivals and tourism-related output rising to levels well above those recorded before the pandemic. Inflation also eased during the year, averaging 2.3 per cent as imported price pressures softened.
Despite the strong growth performance, the IMF noted that significant fiscal and external imbalances remain. The current account deficit stayed elevated at 38 per cent of GDP, largely reflecting substantial imports associated with major infrastructure and development projects. At the same time, the primary fiscal deficit widened during the 2024/25 fiscal year as the government accelerated spending on resilient road networks and geothermal energy infrastructure. While these investments are expected to strengthen long-term growth and resilience, they have temporarily interrupted the fiscal adjustment achieved in recent years. Public debt has declined considerably from its post-pandemic peak but remains high at approximately 103 per cent of GDP, well above the Eastern Caribbean Currency Union’s benchmark of 60 per cent.
The IMF also highlighted the stability of Dominica’s financial system. Commercial banks remain adequately capitalised and liquid, while credit growth strengthened modestly in 2025. However, vulnerabilities persist, including elevated non-performing loans and significant exposure to sovereign and overseas investments. The credit union sector continues to play an increasingly important role in financing the private sector, accounting for more than half of total private sector credit. Nevertheless, the Fund cautioned that the sector faces challenges related to capital adequacy, loan provisioning, and asset quality.
Looking ahead, Dominica’s medium-term outlook remains broadly positive. Economic growth is projected to average around 3 per cent in the near term, supported by ongoing investment in strategic infrastructure projects, before gradually moderating as construction activity slows. The current account deficit is expected to narrow over time, aided by stronger tourism exports, lower investment-related imports, and reduced fuel imports as the country transitions toward geothermal energy. Public debt is also projected to decline steadily as fiscal balances improve.
However, the IMF warned that risks remain tilted to the downside. Spillovers from the conflict in the Middle East, heightened geopolitical and trade tensions, uncertainty surrounding Citizenship by Investment programme inflows, and the ever-present threat of natural disasters could all weigh on economic performance. Against this backdrop, the Fund emphasised the importance of continued fiscal consolidation, stronger financial sector oversight, and structural reforms aimed at improving trade integration, digital transformation, workforce skills, and institutional capacity. These measures, the IMF argued, will be critical to supporting diversified, climate-resilient growth and strengthening Dominica’s long-term economic prospects.
Source: (Caribbean News Global)
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