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Costa Rica: GDP growth bucks trend, accelerates in Q2

September 30, 2015

In the second quarter of 2015, GDP expanded 2.5% over the same period of the previous year, coming in above Q1’s revised 2.2% increase (previously reported: +2.6% year-on-year). Q2’s acceleration is the first in seven quarters, and was mainly due to a strong increase in domestic demand, particularly investment, which more than offset a sharp deterioration in the external sector.

In Q2, domestic demand increased from Q1’s 3.8% increase to a much stronger 9.0% expansion, the strongest pace of growth since March 2011. Total consumption expanded 4.1% in Q2 (Q1: +4.4% year-on-year). Private consumption decelerated slightly to 4.1% (Q1: +4.5% yoy) while government spending recorded a 3.6% expansion in Q2, down slightly from Q1’s print of 3.7%. Gross fixed investment surged to a 16.8% expansion in Q2, well above the 0.6% increase recorded in Q1. As a result, total investment also witnessed a drastic increase of 22.2%, up from just 2.1% in Q1.

On the external side of the economy, exports of goods and services registered a 12.0% contraction in Q2 (Q1: -9.6% yoy). Imports also contracted, falling 1.2%, which was up from Q1’s 6.7% decrease. As exports dropped at a faster pace than imports, the external sector’s net contribution to overall growth deteriorated to minus 6.1 percentage points from the minus 1.5 percentage points recorded in Q1.

The Central Bank expects the economy to expand 2.8% in 2015 and 4.0% in 2016. FocusEconomics Consensus Forecast panelists expect GDP to expand 3.2% in 2015, which is down 0.1 percentage points from last month’s projection. For 2016, participants see economic growth accelerating to 3.8%.

Author:, Economist

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Costa Rica GDP Q215 0

Note: Year-on-year changes of GDP in %.
Source: Costa Rica Central Bank (BCCR) and FocusEconomics Consensus Forecast.

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