110
Costa Rica Economic growth is projected to be around 2¼ per cent in 2020-21, underpinned by gradually improving domestic demand, tourism and exports of business services. Declining inflation will gradually support consumption. Investment has been weak, but will benefit from lower interest rates. Informality and inequality remain high, hampering productivity. Fiscal policy continues to be characterised by high budget deficits and rising public debt, although recent tax and spending reforms, if fully implemented, will help to restore medium-term sustainability. Monetary policy should remain accommodative, given increasing economic slack. Improving access to, and quality of, early childhood education is key to increased female labour market participation. Economic activity has slowed down The global trade slowdown, regional political instability, lower prices of main export goods and adverse weather effects have reduced growth. The very high unemployment rate, at 12%, is eroding consumer confidence. Credit growth and business confidence are also subdued, and investment remains weak. The recently introduced VAT induced a transitory pick-up in inflation.
Costa Rica High unemployment is a drag on private consumption % of labour force 16 14
Y-o-y % changes 8
Real private consumption¹ →
Budget deficits remain large % of GDP 8
% of GDP 32
Total expenditure →
7
6
12
6
4
10
5
2
20
8
4
0
16
6
3
-2
12
4
2
-4
8
2
1
-6
4
0
-8
0
← Unemployment²
2002 2004 2006 2008 2010 2012 2014 2016 2018
28
← Budget balance ← Primary balance
2006
2008
2010
2012
2014
24
2016
2018
0
1. 2019 is defined as the year-on-year growth of 2019Q2 with respect to 2018Q2. 2. 2019 refers to 2019Q2. Source: OECD Economic Outlook 106 database; and Ministerio de Hacienda. StatLink 2 https://doi.org/10.1787/888934045221
OECD ECONOMIC OUTLOOK, VOLUME 2019 ISSUE 2: PRELIMINARY VERSION © OECD 2019