According to the Central Bank, this year the Costa Rican economy will contract by 4.5%, an estimate that would be optimistic in the current context of fiscal and economic crisis, uncertainty, distrust and lack of decisions in the transcendental issues facing the country.
The recent results of local production and the new estimates of global economic activity have allowed the Central Bank of Costa Rica (BCCR) to revise its economic growth projections for the country: the economic contraction for 2020 is expected to moderate to 4.5%, from the 5.0% predicted in the 2020-2021 Macroeconomic Program Review of last July. For 2021, an annual increase in production of 2.6% is projected, a figure 0.3 percentage points (p.p.) higher than that also announced in July.
As of June, Central American economies began to show signs of incipient recovery and as of August, Guatemala, Nicaragua and Costa Rica registered the smallest drops in their levels of economic activity.
Since March of this year, the region has faced a severe economic crisis generated by the outbreak of covid-19. The strict quarantines decreed, the closure of borders and commercial establishments, ended up damaging the dynamism of productive activities.
In the context of the crisis generated by the outbreak of covid-19 and after reporting a -9% year-on-year variation in July, in August the IMAE registered a smaller reduction by contracting 8% compared to the same month in 2019.
The fall in the volume of production is greater in the activities of hotels and restaurants (59.3%), transport and storage (27.4%) and trade (15.5%), all of which is closely related to the greater incidence in these sectors of national and international restrictions on the movement of people and goods, reported the Central Bank of Costa Rica (BCCR).
After reporting in June a 7% year-on-year variation, in July the monthly index of economic activity continued to fall, registering an 8% drop with respect to the same month in 2019, a decrease that is explained by the economic crisis affecting the country.
The lower activity, which is due to the impact that the pandemic has had in Costa Rica and around the world, is seen in the five major economic activities (agriculture, manufacturing, construction, trade and services) that make up the monthly index of economic activity (IMAE).
In April the Central Bank of Costa Rica predicted that by the end of 2020 GDP would fall by 3.6%, but due to the current health and economic crisis scenario the projections worsened, and now a 5% contraction in production is estimated.
The effect of the current international situation would be transmitted to the national economy through various channels: growth in trading partners, lower prices of raw materials and financial conditions, according to an official report.
At the height of the pandemic and economic crisis, the Costa Rican president announced, on a national chain, an economic recovery plan with no clear direction, no assigned leaders and no concrete actions.
In the message broadcast on the night of July 12, President Carlos Alvarado vaguely explained part of the plan to be adopted to overcome the health and economic crisis generated by the spread of covid-19.
Arguing that the country is at risk of taking the route of an exponential covid-19 infection curve, the government suspended phase 3 of the commercial reopening and decreed new vehicle restrictions for June 20-21.
Due to the increase in cases announced on June 19 at a press conference, the government decided to tighten health measures issued by the Ministry of Health to contain the spread of the disease, thus postponing the third phase of reopening announced on June 18.
During January, IMAE registered a 2.5% year-on-year variation, down from the 2.8% reported at the end of 2019.
Most economic activities show positive year-on-year variations in January and higher than a year ago, with the exception of construction, whose production decreases, reported the Central Bank of Costa Rica (BCCR).
"Growth remains susceptible to adverse shocks to global growth, economic and socio-political stress in Nicaragua, the continued weakness in consumer and business confidence, and uncertainty regarding the implementation of the fiscal reform.”
After the slowdown in growth between 2017 and early 2019, the economy has recovered since mid-2019, as a result of a rebound in services, agriculture and manufacturing, which produced an estimated 2.1% growth in 2019, reported the International Monetary Fund (IMF).
As of December 2019, IMAE recorded a 2.8% increase, partly due to the performance of the manufacturing and service sectors.
This result places the average annual growth in production at 1.9%, lower than the previous year's (2.6%), which, as the Central Bank has pointed out, reflects the economic slowdown experienced by the country since April 2016 and which reached its lowest point in May 2019, a situation caused by a combination of circumstances (uncertainty associated with the fiscal situation, external shocks to trade flows and adverse weather conditions), the official report explains.
In 2019, 25 M&A files were submitted to the Costa Rican authorities, down from 40 in 2018, which can be attributed to the decline in economic activity.
Although in the second half of 2019 the Costa Rican economy began to report signs of recovery, last year was marked by a slowdown in the Monthly Index of Economic Activity (IMAE) and consumer uncertainty.
With the 2.9% year-on-year change reported in the IMAE in November 2019, the economy has accumulated six consecutive months of acceleration.
The country's production, measured through the Monthly Index of Economic Activity (IMAE), registered a 2.9% year-on-year growth in November, the highest since July 2018, reported the Central Bank of Costa Rica (BCCR).
In the last two years, 100,000 loans that were up to date became arrears, and bankers attribute this mainly to the increase in unemployment and the decline in economic activity.
The slowdown that the Costa Rican economy has suffered in the last two years is taking its toll not only on businesses and families, but also on the banking sector.
Figures from the General Superintendence of Banks and Financial Entities (Sugef) detail that "...
During October 2019, a 2.5% year-on-year variation was reported in the IMAE, a rise that is explained by the behavior of manufacturing activity and the service sector.
According to the report of the Central Bank of Costa Rica (BCCR), with the rise reported in the tenth month of the year, the Monthly Index of Economic Activity (IMAE) showed signs of recovery for the fifth consecutive month.
During August and September, Costa Rica's monthly agricultural activity index reported a 0.16% and 0.82% year-on-year increase, respectively, reversing the downward trend recorded in previous months.
According to data from the Central Bank of Costa Rica (BCCR), between October 2018 and July 2019 the Monthly Index of Agricultural Activity (IMAGRO) registered negative year-on-year variations.