Costa Rica GDP Q1 2017

Costa Rica

Costa Rica: GDP growth slows on weak consumer spending in Q1

June 30, 2017

The economy appears to have lost steam in Q1, seemingly slowed down by a sharp deceleration in the pace of consumer spending. According to data released by the Central Bank on 30 June, GDP growth slowed to 3.0% in Q1 and came up very short of the 4.3% growth recorded in Q4 2016. Notwithstanding the recovery in fixed investment in the quarter, the report disappointed, falling well below the 4.3% expansion expected by our FocusEconomics Consensus Forecast panelists.

Consumption dynamics in the quarter were particularly weak, with growth in total consumption almost halved on the back of a notable slump in private consumption (Q1: +1.7% yoy; Q4: +3.8% year-on-year). For its part, growth in government consumption remained broadly stable at 5.6% (Q4: +5.7% yoy). In the report’s single bright spot, fixed investment rebounded to 5.2% growth in the quarter following nearly a year of contraction (Q4: -0.4% yoy).

A sharp deceleration in the growth of exports knocked the external sector off-course following a year of strong growth. Exports grew at a meagre 2.7% in Q1 (Q4: +7.1% yoy), a six-quarter low. Imports, on the other hand, expanded at a faster clip in Q1, coming in at 4.0% (Q4: +3.4% yoy)—likely the result of higher imported fuel costs at the outset of the year. Consequently, the external sector’s contribution to growth was minus 0.1 percentage points (Q4: plus 0.1 percentage points), marking the sector’s first drag on headline growth in more than a year.

Growth is expected to pick up in the coming quarters. In particular, the Central Bank expects the economy to shake off a weak Q1 and record full-year GDP growth of 4.1% both this year and next. Striking a similar tone, FocusEconomics Consensus Forecast panelists expect GDP growth of 4.0% in 2017, which is unchanged from last month’s projection. In 2018, our panelists see GDP growth edging down slightly to 3.9%.

Author:, Economist

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Costa Rica GDP Chart

Costa Rica GDP Q1 2017

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

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