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Costa Rica: GDP growth slows in Q4 on shrinking investment

March 31, 2015

In the fourth quarter of 2014, GDP expanded 3.0% over the same period of the previous year, coming in below Q3’s 3.4% increase and marking the smallest expansion since Q1 2013. Q4’s deceleration reflects that shrinking investment more than offset a slightly better performance of the external sector.

In Q4, domestic demand moderated from Q3’s 1.7% rise to a weaker 1.1% expansion, the softest pace of growth since Q4 2009. Total consumption expanded 4.0% in Q4 (Q3: +3.9% year-on-year). In particular, private consumption rose 4.1% (Q3: +3.9% yoy) while government spending recorded a 3.5% expansion in Q4, matching Q3’s print. Gross fixed investment contracted 1.3% in Q4, which contrasted the 3.3% rise registered in Q3 and marked the largest drop since Q4 2009. Total investment deteriorated further from Q3’s 4.2% decline to a steeper 10.0% drop in Q4.

On the external side of the economy, exports of goods and services registered a 8.0% contraction in Q4 (Q3: -1.8% yoy). Imports also shrank, falling from Q3’s 5.2% decrease to an 11.3% contraction in Q4. As imports dropped at a faster pace than exports, the external sector’s net contribution to overall growth improved slightly from the 1.8 percentage points recorded in Q3 to 1.9 percentage points in the fourth quarter.

In seasonally-adjusted terms, GDP expanded 0.4% in Q4 over the previous quarter, coming in below the 0.8% increase seen in the third quarter.

The Central Bank expects the economy to expand 3.4% in 2015 and 4.1% in 2016. FocusEconomics Consensus Forecast panelists expect GDP to expand 3.6% in 2015, which is unchanged from last month’s projection. For 2016, participants see economic growth accelerating to 3.8%.

Author: Teresa Kersting, Economist

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Costa Rica GDP Chart

Costa Rica GDP Q414

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

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