Risks of a Declining Economy

The State of the Nation 2018 Report explains that during 2017 and the first months of 2018 the progress of Costa Rica's economy has been adverse and, in the short term, the prospects for economic opportunities, solvency and stability are negative.

Tuesday, November 13, 2018

Most of the drivers of Costa Rica's economy have declined in recent months, resulting in Costa Rica going through a period of multiple economic and political risks.

In 2017, the Costa Rican economy experienced a deterioration in most of its indicators: lower real GDP growth, deceleration of internal and external demands, reduction in jobs, higher prices, increase in interest rates and greater deterioration of public finances. This section follows the main economic indicators in 2017 and the first months of 2018.

The Report presents five approaches that synthesize the current situation in Costa Rica.

1. In 2017 and 2018, the strategy applied by successive governments in the last decade, which tried to expand public spending from a rapid, accessible and cheap indebtedness and without a correlative tax reform, became unfeasible.

2. The economic slowdown reinforced the structural disconnection between production and employment, thereby reinforcing barriers to facing poverty and the deterioration of social coexistence.

3. Persistent social and territorial disparities resulting from high levels of inequality have led to the emergence of areas of social exclusion and new institutional challenges.

4. The recurrent practice of rejecting the criteria of environmental sustainability in the commitment to use the territory and its natural resources has created problems of mobility and risk, and the solution implies high costs that the country is increasingly unable to face.

5. An electoral process with dynamic and atypical results increased the complexity of political governance, and so the system has begun to provide adaptive responses whose results and effectiveness are still uncertain.

All in all, the country is living in a period of great care. It faces economic, social, environmental and political risks, in addition to external challenges caused by several recent events.

See full report. (In Spanish)

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