Costa Rica GDP

Costa Rica

Costa Rica: GDP growth accelerates in Q3 on the back of domestic demand

December 30, 2015

In the third quarter of 2015, GDP expanded 3.0% over the same period of the previous year, coming in above Q2’s 2.7% increase and marking the strongest expansion in one year. The acceleration reflects that a drastic deterioration in the external sector was offset by a notable improvement of domestic demand.

In Q3, domestic demand increased from Q2’s 5.8% rise to a much stronger 7.4% expansion, which marked the strongest pace of growth since Q1 2011. Total consumption expanded 4.7% in Q3 (Q2: +4.5% year-on-year), which was also the fastest pace since Q1 2011. Private consumption rose 4.9% (Q2: +4.6% yoy), while government spending recorded a 3.1% expansion in Q3, down from Q2’s print of 3.4%. Gross fixed investment went down from Q2’s 14.9% expansion to 11.3% in Q3. Total investment, on the other hand, soared from Q2’s 9.2% expansion to 15.0% in Q3, marking an almost-four-year high.

On the external side of the economy, exports of goods and services registered an 8.6% contraction in Q3 (Q2: -7.4% yoy). Imports also contracted, falling 1.6%, which was up from Q2’s 2.5% decrease. As exports dropped at a faster pace than imports, the external sector’s net contribution to overall growth deteriorated further to minus 3.9 percentage in Q3 (Q2: -2.8 percentage points). As a result, the external sector’s contribution to GDP is now at the lowest level since Q1 2011.

The Central Bank expects the economy to expand 4.2% in 2016. FocusEconomics Consensus Forecast panelists expect GDP to expand 3.6% in 2016, which is unchanged from last month’s projection. For 2017, participants see economic growth accelerating to 3.8%.

Author: Jean-Philippe Pourcelot, Economist

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