Investment in Costa Rica
Costa Rica - Investment
GDP growth records slowest increase since Q1 2021 in Q3
Preliminary data shows that GDP growth lost momentum in Q3, falling to 2.4% year on year from 6.1% in the second quarter. Q3's reading marked the weakest reading since Q1 2021. The slowdown came on the back of surging double-digit inflation, a weakening external sector and as the impact of aggressive rate hikes fed through to the economy.
The downturn was broad-based, with private consumption, public spending, fixed investment and exports all weakening. Private consumption growth eased to 3.2% year-on-year in Q3 compared to a 3.4% expansion in Q2. Public consumption dropped at the sharpest pace since Q4 2020, contracting 0.4% (Q2: +8.1% yoy). Fixed investment contracted 5.7% in Q3, marking the worst result since Q4 2020 (Q2: -2.7% yoy).
Exports of goods and services growth fell to 10.5% in Q3 (Q2: +10.7% yoy). Conversely, imports of goods and services bounced back, growing 8.8% in Q3 (Q2: -6.1% yoy).
Turning to Q4, the economy is likely to moderate further as recent rate hikes weigh on activity. Elevated inflation will continue to hit real incomes and private consumption, albeit less so than in Q3. Moreover, weakening global growth will likely be a drag on the external sector. Looking further ahead, if approved, IMF funding of almost USD 1 billion will support public spending. Moreover, the expansion of high-value subsectors such as medical technology and semiconductors will likely boost productive potential, investments and exports. That said, a lack of a parliamentary majority remains a key risk to advancing the government’s economic agenda.
On the outlook for 2023, analysts at the EIU commented:
“Government spending will continue to make only a small contribution to growth, limited by Costa Rica's low ratio of tax revenue to GDP and the conditions of the [IMF program]. Although we forecast that export growth will cool in 2023 amid an economic slowdown in the US, a recession in Europe and anemic growth in China, net exports will still contribute to growth, as import growth will be slow. The return of international tourists is another factor that will support export growth.”
FocusEconomics panelists see the economy expanding 3.6% in 2022, which is unchanged from last month’s forecast, and 3.0% in 2023.
Costa Rica - Investment Data
|Investment (annual variation in %)||3.0||4.8||-2.5||3.0||-6.4|
5 years of economic forecasts for more than 30 economic indicators.
Costa Rica Investment Chart
Source: Costa Rica Central Bank and FocusEconomics calculations.
Costa Rica Facts
|Exchange Rate||571.0||-0.57 %||Jan 01|
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November 11, 2022
Economic activity grew 1.7% in September (August: +4.4%).
November 7, 2022
Inflation fell to 9.0% in October, following September’s 10.4%.
October 31, 2022
Preliminary data shows that GDP growth lost momentum in Q3, falling to 2.4% year on year from 6.1% in the second quarter.
October 26, 2022
At its 26 October meeting, the Central Bank of Costa Rica (BCCR) raised rates by 50 basis points, bringing the policy rate to 9.00%.
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Inflation came in at 10.4% in September, down from August’s 12.1%.