Costa Rica’s economic policies are generally considered to be sound.The US Stae department notes that compared with its Central American neighbours, Costa Rica has achieved a high standard of living, with a per capita income of about US$5,800, and an unemployment rate of 4.6 per cent. Consumer price inflation is high but relatively constant at about a 10 per cent annual rate in the last decade.

The International Monetary Fund (IMF), World Bank and the United Nations Economic Commission for Latin America and the Caribbean (ECLAC) broadly concur that strong business and consumer confidence, falling interest rates and rapid growth in the construction sector have contributed to something of a domestic boom which has risked overheating the economy.

 

The 2008 rise in international food and fuel prices, as well as the slowdown in the world economy, had a predictably negative impact on the growth of the Costa Rican economy, with the growth rate down to 3.3 per cent compared with 7.3 per cent in 2007. At the same time, national open unemployment edged up slightly to 5 per cent (bucking the trend of the last three years). ECLAC expected the current account deficit to amount to the equivalent of 8 per cent of GDP, while the fiscal deficit of the central government should be around 0.5 per cent of GDP. Inflation registered an increase and was estimated by ECLAC to be around 15 per cent at the end of the year. According to ECLAC estimates, GDP will grow by 1 per cent in 2009. Economic performance will continue to be influenced by weak external demand. The slowdown in the world economy and recession in the country’s main trading partner (United States) will inevitably result in low growth in merchandise exports, tourism revenues and inflows of foreign direct investment (particularly investment in the property sector). Lower international prices for fuel and raw materials have eased pressure both on the current account deficit and on inflation, with the latter expected to be lower than in 2008 but nonetheless close to 10 per cent.

 

These are the opening paragraphs of the Costa Rica chapter in the Americas Review 2009 to be published in November 2009. To order your copy of the Americas Review 2009 simply click here

Costa Rica’s economic policies are generally considered to be sound.The US Stae department notes that compared with its Central American neighbours, Costa Rica has achieved a high standard of living, with a per capita income of about US$5,800, and an unemployment rate of 4.6 per cent. Consumer price inflation is high but relatively constant at about a 10 per cent annual rate in the last decade.