No margin for error

As a result of the economic slowdown and the imbalance in public finances, Costa Rica faces a complex and high-risk future, in which the margins for action and maneuver will be increasingly limited.

Thursday, November 14, 2019

The State of the Nation 2019 report explains that the economic slowdown and imbalance in public finances created a scenario of great complexity and risk, both economic and political, which aggravated the structural weaknesses or "blind spots" of the national development style.

"... The margins for action to confront this situation have narrowed. In effect, fiscal problems prevent a reactivation based on greater public spending and investment, the confidence of consumers and businessmen has decreased to minimum levels and a growing citizen skepticism towards democracy reduces the 'political reserve' of good will so that the population assumes sacrifices or postpones their demands," the document states.

The forecasts are not clear for Costa Rica, because the document affirms that "... in an unexpected way -given the situation of party fragmentation and weakness in the Government's support bases-, the Executive and Legislative branches articulated responses that maintained economic, social and political stability. The outcome of this conjuncture is, nowadays, of reserved prognosis, and the situation, delicate and fluid."

As of September 2019, "... the economic downturn continues and is hitting certain regions and sectors especially hard. Faced with this scenario, the State has little room for maneuver to reactivate the economy, as the chronic imbalance in its finances limits its ability to stimulate aggregate demand through increased spending and investment, including the provision of new resources for productive development policies. This imbalance leaves no choice but to borrow and, in addition, imposes limitations on the management of public debt, which increase the cost of financing and generate additional risks."

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