Consumption in Costa Rica

Costa Rica - Consumption

Economic growth hits one-and-a-half-year high in Q4 2019 but outlook worsens

In the fourth quarter of 2019, the economy grew 3.3% compared to the same quarter a year earlier, up from the revised 2.5% growth reading in the third quarter (previously reported: +2.4% year-on-year) and the fastest reading since Q2 2018.

Government consumption surged 10.2% in the fourth quarter compared to the same quarter a year earlier, up from 6.0% growth in Q3 and largely due to a low base effect following public sector strikes in Q4 2018. Private consumption accelerated to 2.0% in Q4 from 1.6% in Q3, likely in part due to an incremental increase in consumer confidence. Moreover, although fixed investment decreased 4.7% in Q4, seemingly on lower bank lending and business confidence, the decrease moderated compared to Q3.

Exports of goods and services increased 3.7% in Q4 compared to the same quarter a year earlier, up from the 2.6% increase in Q3. Imports, meanwhile, contracted 1.6% in Q4, contrasting the 2.0% increase in Q3. Overall, the external sector contributed 1.8 percentage points to economic growth in Q4, up from the 0.2 percentage-point contribution in Q3.

Turning to the first quarter of this year, the economy likely slowed as the number of coronavirus cases reported nationally climbed through March, forcing authorities to impose containment measures such as banning mass gatherings and tightening international travel restrictions. Moreover, weakening economic activity among trading partners such as the U.S. likely dampened export prospects. However, recently announced fiscal and monetary policy stimulus should help mitigate the economic damage.

Our Consensus Forecast panelists are currently revising their economic growth forecasts. We will provide new Consensus Forecasts from 21 April.