Preventive reasons for unforeseen expenses in the context of the pandemic and low liable interest rates are some of the factors that explain the increase in the balance of short-term savings instruments in the Costa Rican market.
In the context of the spread of covid-19 and the restriction of several productive activities, the broad money supply (including cash held by the public and highly liquid financial instruments in national and foreign currency) showed a 35.7% year-on-year growth rate in June 2020, considerably higher than the 2.7% recorded in the same month in 2019, while the balance of term instruments fell, reported the Central Bank of Costa Rica (BCCR).
Excess liquidity in the financial system, soaring loans in dollars, a rising fiscal deficit and a less favorable global environment will complicate the path in the rest of the year and in 2017.
The document"Macroeconomic Review Program 2016-2017"by the Central Bank of Costa Rica says that these four elements are the main factors that could adversely affect overall economic performance.
The risks are: uncertainty about sustainability of public finances, increasing dollarization of the loan portfolio, and inflationary pressures from excess liquidity.
In its commentary on the national economy No. 5-2016 of May 2, 2016, the Board of the Central Bank of Costa Rica said:
"... The Central Bank reiterates the existence of risks to macroeconomic stability.
The Central Bank of Costa Rica has submitted a query regarding the possibility of eliminating the restriction on financial institutions of varying its assets in dollars per day by up to 4% .
The Chamber of Banks looks favorably on the initiative to abolish the current limit of 4% so that more currencies can be bought and sold daily.
The Central Bank "justified in the consultation paper that the move is in line with exchange rate flexibility, to allow intermediaries to increase participation in the determination of the exchange rate, managing risk better and providing liquidity."
The Central Bank reported that as of the 12th and until at least the 18th of September the PBR will rise 0.05% going from 6.50% to 6.55%.
Elfinancierocr.com publica: “Según el cálculo del Banco Central de Costa Rica (BCCR), el indicador se incrementó por aumentos en las tasas de captación (ahorros) de los bancos públicos, cooperativas de ahorro y crédito y las mutuales.
The Central Bank of Costa Rica reported that from 23 and until at least until May 30, the BPR will remain at 6.70%.
"The passive base rate (PBR) shows a trend of stability in the short term, particularly from the end of March until the 29th of May, when the most recent calculation of this indicator came into effect ...", reported Elfinancierocr.com.
The Central Bank of Costa Rica reported that as of May 9 the passive base rate will be set at 6.70%, down 0.05% from the previous week.
"With this reduction, the basic passive rate (TBP) reaches its lowest level since February 2008. At the beginning of this 2013, the indicator was at 9.20%, so it has lost 2.5% in just four months. A year ago, the TBP was by 10%," noted an article in Elfinancierocr.com.
The Central Bank of Costa Rica reported that from 2 and at least until May 8, the PBR will remain at 6.75%.
"This is one of the lowest recent levels and for the longest duration. The last time it was at 6.75% was in October 2010 and then it was only for a week," noted an article in Elfinancierocr.com.
Economists and stock brokers in Costa Rica are pointing towards a PBR of nearly 7% with inevitable declines and increases, but not very far from this rate.
The PBR has been set, from now until May 1st, at 6.75%, down 0.15% from the previous week, when it stood at 6.90%.
With this new low announced by the Central Bank of Costa Rica, the passive base rate (PBR) has lost 2.75% since Dec. 20 when the current period of decline began.
"This week, all of the groups of financial institutions considered for the calculation reduced the rates that they pay to their depositors on savings.
After three consecutive weeks at 6.95%, the PBR in Costa Rica dropped today to 6.90%.
According to the latest update by the Central Bank of Costa Rica (BCCR), this week the base lending rate (PBR) will drop to 6.90%, the lowest level of indicator in 2013, which started out in January at 9.20%.
"With this setting, the PBR is approaching the level of inflation measured by the Consumer Price Index (CPI) for March which was 6.21%," noted an article in Elfinancierocr.com.
The basic passive rate will be located from 7 March at 7.25%, the lowest in the past 18 months, after having reached 11% earlier in October.
Gabriel Alpizar, financial risk manager at the Bank of Costa Rica, said that "the main reason for the fall of the base rate lies in the fact that there is an abundant liquidity in colones which the central bank has made in recent months, adjusting this macroprice which is fundamental to our economy", noted an article in Crhoy.com.
Continuing the downward trend of recent weeks, the passive base rate (PBR) as of the January 17, is now at 8.90%.
Since the Central Bank of Costa Rica changed its methodology for calculating the PBR, this is the fourth consecutive drop of the indicator.
"The behavior of the TBP coincided with the trend seen in recent weeks in the stock market, specifically with the pace of yields from the auction of Treasury bonds (primary market).
The reduction is significant and moves the indicator away from the 11% reached just two months ago, but is still two percentage points above its November 2011 level.
From the Blog Pulso Bursátil by Aldesa:
The base rate fell again today, closing at 9.50%, according to the Central Bank of Costa Rica, which calculates the indicator.
The base rate is an average of deposit rates used by financial institutions with maturities of 150-210 days.
After staying for a week in 11%, the highest level reached in 2012, the base rate has returned to settle at 10.5%.
Methodology for calculating the passive base rate by the Central Bank of Costa Rica:
A. definition
The base rate is a weighted average of the interest rates in colones on gross collections negotiated by financial intermediaries for domestic residents and interest rates on savings instruments at the Central Bank and by the Ministry of Finance’s negotiations both in the primary and secondary market, each corresponding to periods of between 150 and 210 days.
The base rate (BPR) has gone up half a percentage point to stand at 11%, the highest value so far this year.
"This week, the calculation of the BPR was influenced by increases in the average Treasury rates, which increased from 9.96% to 10.01%, and public banks rising from 10.87% to 11 , 05%, according to the Central Bank's website. Some 400,000 loans with public banks alone are linked to the movements of the BPR", reports Nacion.com
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