Current Account Deficit Grows in Costa Rica

The latest results in the Balance of Payments, for the third quarter of 2010 show a significant growth in external imbalance.

Tuesday, January 4, 2011


The current account deficit grew 70% over the second quarter of that year. The main source of the imbalance is the excess of imports over exports. This deficit is partly financed by the surplus in the balance of services and at the level of balance of payments it is usually funded with income from foreign direct investment and other surplus items in the capital and financial accounts.

For the quarter at question, the direct foreign investment inflow was insufficient to pay the excess of imports, so were financed by borrowing abroad.

The imbalance has been aggravated by an appreciated exchange rate, making foreign goods cheaper in relation to national products, encouraging imports. This situation is not a problem in itself, but it makes the country more vulnerable, more dependent on conditions of international funding and investment, considering that current international situation is not reliable. Also, a larger private debt and too much government debt could translate into higher borrowing costs.

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