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.
Author: Christopher Thomas, Economist