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Costa Rica GDP Q4 2023

Costa Rica: GDP growth softens in Q4

GDP growth waned to 5.1% year on year in the fourth quarter, from 5.5% in the third quarter. Q4’s reading marked the worst reading since Q1. On a seasonally adjusted quarter-on-quarter basis, GDP growth accelerated to 1.8% in Q4 from 1.3% in Q3. Over 2023 as a whole, the economy grew 5.1%, up from the 4.6% expansion tallied in 2022.

Household spending increased 6.1% in the fourth quarter, which was below the third quarter’s 6.5% expansion. The slight moderation came amid a softer decline in consumer prices. Meanwhile, government spending dropped at the sharpest pace since Q3 2022, contracting 0.4% (Q3: +0.7% yoy). Additionally, fixed investment contracted 0.5% in Q4, marking the worst reading since Q3 2022 (Q3: +17.7% yoy).

On the external front, exports of goods and services growth improved to 7.4% in Q4 (Q3: +5.7% yoy) as growth in both merchandise exports and tourist arrivals strengthened in the quarter. Conversely, imports of goods and services growth slowed to 2.8% in Q4 (Q3: +6.1% yoy).

After a stellar 2023, the economy is projected to gradually lose steam throughout this year. A marked slowdown in exports growth amid softer external demand, coupled with softer expansions in both private spending and investment, will drag on growth. A potential deterioration of the country’s security situation dampening investor sentiment and a weaker-than-expected U.S. economy are downside risks.

Analysts at the EIU commented on risks to the outlook:

“The biggest risk here for 2024-25 is that the surge in violent crime in 2023 causes potential investors to reassess the quality of Costa Rica’s business environment. The country benefits from its reputation of relative safety and reliability in an otherwise violent region, but this comparative advantage risks being eroded.”

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