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Fitch Warns Over Costa Rica's Fiscal Deficit

The draft state budget for 2015 contains imbalances that will deepen the deficit, taking it to a record 6.7% of GDP.

Thursday, September 4, 2014

The persistence of high fiscal deficit, a faster deterioration than expected in the dynamics of public debt, which was already high, and increasing funding restrictions could put pressure on the sovereign rating of 'BB +' and its perspective, which so far is stable.

Added to this is the government's decision to delay until 2017 the implementation of a tax reform that would generate increased revenues.

Meanwhile, measures to contain spending and fight tax evasion announced by the government are having a real impact in terms of uncertainty, noting that in the first six months of 2014, government spending grew by 9.8%, while revenues increased only 7.5%.

The dismal fiscal outlook is complemented by forecasts of economic growth, which in the best case will be only moderate.

Source: Fitch Ratings

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