Costa Rica: Economic growth picks up a tad in Q4; Carlos Alvarado elected president on 1 April
March 28, 2018
The economy performed modestly in the fourth quarter of last year. According to seasonally-adjusted data released by the Central Bank on 28 March, year-on-year economic growth accelerated to 3.1% in Q4, up slightly from 2.8% growth in Q3.
The domestic economy had a mixed performance in Q4. While year-on-year private consumption growth accelerated to 2.6% in Q4 from 2.4% in Q3, government consumption growth slowed to 2.8% in Q4 (Q3: +3.0% year-on-year). However, fixed investment weighed on growth in the quarter. On the back of political uncertainty in the run-up to presidential and legislative elections, and likely deterred by higher interest rates, fixed investment contracted 5.5% in Q4 (Q3: -12.3% yoy).
Year-on-year growth in exports of goods and services slowed to 2.1% in Q4 from 5.1% in Q3. Moreover, growth in imports accelerated to 3.0% in Q4 from 1.7% in Q3. Because of these dynamics, the external sector detracted 0.4 percentage points from economic growth in Q4, a downward swing from Q3’s 1.1 percentage-point contribution.
On 1 April, Carlos Alvarado of the incumbent Citizens’ Action Party was elected president, leaving the other contender, Fabricio Alvarado of the National Restoration Party, as runner-up. The president-elect will take up office on 8 May. A poll released on 23 March by the University of Costa Rica had showed that the two candidates were evenly matched in terms of public support. For the economy to find its mojo this year, this electoral outcome will have to inspire action in the country’s politically fragmented Legislative Assembly, particularly regarding fiscal policy, and boost confidence among consumers and businesses.
Author: Edward Gardner, Economist