Costa Rica Economic Forecast

Costa Rica Economic Outlook

October 9, 2018

The economy found its feet in the second quarter of 2018, as year-on-year GDP growth accelerated to the fastest pace in a year. The upturn was driven by increased fixed investment, which was partly due to a low base effect. Government consumption increased at a steady pace, while private consumption expanded at a slightly slower rate on the back of higher unemployment. The external sector detracted from overall growth. This broadly positive momentum carried over into the start of Q3, as economic activity in July grew at the fastest pace since January 2017. However, the economy will have been hampered by union strikes towards the end of the quarter as, since early September, workers have rallied against a fiscal reform bill currently making its way through the Legislative Assembly. The bill will introduce a VAT system, raise income taxes on higher-income earners and constrain government spending from next year, all to the benefit of the public purse but fiercely opposed by those protesting on the streets.

Costa Rica Economic Growth

A more stable political environment coupled with strong growth in the United States—boosting demand for exports—should support economic growth this year and next. However, austerity measures to help reduce the fiscal deficit will weigh on prospects, as could instability in neighboring Nicaragua. FocusEconomics Consensus Forecast panelists expect GDP to grow 3.1% in 2018 and 3.2% in 2019, which is down 0.1 percentage points from last month’s projection.

Costa Rica Economy Data

20132014201520162017
Population (million)4.74.84.94.95.0
GDP per capita (USD)10,44910,33810,85010,66710,657
GDP (USD bn)45.446.550.352.452.9
Economic Growth (GDP, annual variation in %)2.33.53.64.23.2
Consumption (annual variation in %)3.03.94.23.32.7
Investment (annual variation in %)-0.33.33.04.0-3.1
Unemployment Rate8.39.79.69.59.3
Fiscal Balance (% of GDP)-5.4-5.6-5.7-5.3-6.2
Public Debt (% of GDP)35.838.440.945.049.2
Money (annual variation in %)11.911.613.97.39.5
Inflation Rate (CPI, annual variation in %, eop)3.75.1-0.80.82.6
Inflation Rate (CPI, annual variation in %)5.24.50.80.01.6
Inflation (PPI, annual variation in %)1.44.9-0.40.33.1
Benchmark Interest Rate (%)6.507.205.954.455.95
Exchange Rate (vs USD)500.7540.8537.3553.2571.4
Exchange Rate (vs USD, aop)501.0537.2534.6544.0567.9
Current Account (% of GDP)-5.4-5.3-3.8-2.8-3.2
Current Account Balance (USD bn)-2.4-2.5-1.9-1.5-1.7
Trade Balance (USD billion)-6.4-6.4-5.5-5.4-5.3
Exports (USD billion)8.69.19.29.910.6
Imports (USD billion)15.115.614.715.315.9
Exports (annual variation in %)-1.15.60.77.87.0
Imports (annual variation in %)1.23.1-5.23.64.3
International Reserves (USD)7.37.27.87.67.1
External Debt (% of GDP)42.946.546.948.750.8

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Costa Rica Facts

ValueChangeDate
Exchange Rate594.0-0.57 %Oct 12

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