Complicated Economic Scenario

The deterioration of the economy and rising unemployment are the main reasons behind the difficulties faced by companies and individuals in Costa Rica in paying back their bank loans.

Friday, September 7, 2018

According to figures from the General Superintendence of Financial Entities, between January 2017 and July 2018, the percentage of loans in defaults for more than 90 days or in judicial collection, went from 1.65% to 2.51%, showing an upward trend in recent months.

General Superintendent Bernardo Alfaro, explained to Nacion.com that " ... the structure of credit portfolios has changed in the last two decades and now retail banking has more weight in loans for housing and consumption, in particular, and these are precisely the sectors most sensitive to falling into payment problems in situations where there is less economic growth and higher unemployment."

See "Economic panorama is complicated"

Regarding the recent performance of economic activity, the Central Bank detailed in its latest report that after the slowdown of the economy in January-March 2018, growth in production rebounded in the second quarter.

In the case of the level of unemployment in the country, the National Institute of Surveys and Censuses reported that between the second quarter of 2017 and the first three months of 2018 the rate reported a sustained increase going from 8.5% to 10.3 %.  

See also "Costa Rica: Public finances worsen"

However, in line with the rebound in economic activity registered from April to June of this year, the unemployment rate reported a considerable decline between the first and second quarter of 2018, falling from 10.3% to 8.7%.

On the other hand, Carlos Fernández, ex-manager of the Bank of Costa Rica, commented that, " ... besides lower levels of economic activity, interest rates in dollars have increased sharply which is impacting debtors with loans in that currency, especially those who borrowed for housing and businesses."

See the Sugef's figures (In Spanish).

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More on this topic

Costa Rica: More Credits on Default

June 2019

Late loans granted by public banks to small companies amounted to 5.5% in May, 3.8% in the case of medium-size companies and 3.3% in the case of large companies, a situation attributed to the economic slowdown.

The percentage of credits reported by the General Superintendence of Financial Entities (Sugef), refers to loans that went into default for more than 90 days and judicial collection, granted by public entities such as the National Bank, Banco de Costa Rica and Banco Popular.

Unpaid Bank Credits Increase

April 2019

In Costa Rica, low economic activity and rising unemployment explain the 25% increase reported between February 2018 and the same month of 2019 in the value of assets acquired by banks to recover loans.

Figures from the General Superintendence of Financial Entities (Sugef) specify that between February 2018 and the same month of this year, the amount of goods and securities acquired by financial entities because people and companies did not pay their loans increased from $425 million to $533 million.

Bank Default Falls at the End of 2018

March 2019

Between May and September 2018, an increase was reported in the proportion of loans with payment arrears greater than 90 days, but between October and December the trend was downwards.

Data from the General Superintendence of Financial Entities (Sugef) indicate that between September and December 2018, the proportion of loans with payment arrears greater than 90 days, or in judicial collection, decreased from 2.58% to 2.14%.

Costa Rica: Credit Moratorium in Dollars Increases

November 2018

From July 2017 to September 2018, the percentage of loans in dollars with payment arrears over 90 days or in legal collection increased from 1.57% to 2.95%.

The default on dollar loans is still under 3%, which is still considered normal. However, according to the trend reported in recent months in the records of the General Superintendence of Financial Entities (Sugef), the indicator is likely to exceed the 3% barrier.

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