Costa Rica: GDP grows at softest pace since Q2 2019
June 30, 2020
GDP expanded 0.6% year-on-year in the first quarter of 2020 (Q4 2019: +3.2 yoy), marking the softest growth rate since Q2 2019 and largely reflecting Covid-19 containment measures introduced in March.
The downturn was broad-based. Household spending growth fell to 0.6% in Q1, marking the weakest expansion since Q2 2009 (Q4 2019: +1.9% yoy) and coinciding with a small uptick in the unemployment rate to 12.5% (Q4 2019: 12.4%). Moreover, public consumption contracted 1.9% (Q4 2019: +10.0% yoy), while fixed investment slid at a quicker rate of 5.4% in Q1 compared to the 4.7% decrease in the prior quarter.
Exports of goods and services growth fell to 2.5% in Q1, marking the worst result since Q2 2019 (Q4 2019: +3.6% yoy), as demand abroad took a turn for the worse. Imports fell at a slower rate of 0.4% in Q4 (Q4 2019: -1.8% yoy). Overall, the external sector contributed 1.1 percentage points to economic growth in Q1, down from the 1.9 percentage-point contribution in Q4.
Turning to the second quarter, the economy will have contracted sharply as the full weight of coronavirus restrictions hit activity. However, looser restrictions on activity, assuming the virus remains under control, should lead to a gradual easing of the economic damage in the second half of the year. Moreover, laxer fiscal and monetary policy should support activity.
Author: Edward Gardner, Economist