Costa Rica: Inflation Not Caused by Growth

The variation of IMAE in September was 3.08%, highlighting the slowdown trend observed since February.

Friday, November 12, 2010


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February was the month which recorded the highest figure of the year: 6.30%.

However, this indicator has been declining significantly and is converging to the values observed (3.08%) since June of this year, indicating a significant stabilization.

On an annual basis, the variation of IMAE is 4.17%, consistent with GDP growth of 4% expected this year by the Central Bank of Costa Rica (BCCR).

Agriculture, trade and transport are the sectors which are growing at annual rates higher than what shows in the overall index.

More importantly, the manufacturing sector appears to have stabilized their rate of decline. On a quarterly basis, the slowdown in manufacturing sector was 5.6% in the first quarter, while in the third the drop was 0.8%.

For the construction sector, the slowdown in the first quarter is nearly three times the slowdown shown in September. Although the pace of decline is much slower, this sector has yearly contractions of 6%.

The other sector with growth rates below zero, apart from manufacturing and construction, is the removal of soils, where most of the decline is caused by its strong relationship with the construction sector.

The hospitality sector has rebounded on its annual growth rate, which is important considering that September is not yet a high season month.

The rate observed at IMAE gives credibility to the growth goal estimated by the BCCR, considering also that there should not be inflationary pressures towards the end of the year.

It is also important to note that the moderate pace of economic growth implies more room for further reductions in interest rates, since there are no inflation risks other than increases in the price of oil or regulated goods.

In addition, one must also consider that there are incentives by investing in Colones, which discourages domestic investment and credit recovery.



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The Central Bank has confirmed the decline in domestic demand mainly in agriculture, trade, hotels and restaurants, and transport and storage.

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The country's economic activity, measured by the cycle trend of the Monthly Index of Economic Activity (IMAE), recorded a variation of 2.9% in January 2015, 0.4% lower than that observed a year earlier when production grew by 3.3% and 0.7% lower than the average growth of the indicator in 2014 (3.5%).

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The Monthly Index of Economic Activity (MIEA) shows that the value of production fell in March and April, which is the first decline in the index's level from May and June 2012.

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