The country ranks third in Latin America in terms of the difference between income and expenditure in relation to GDP.
In 2012, government revenues totaled 14.4% of GDP while expenditures were 18.8%.
Data from the Economic Commission for Latin America and the Caribbean (ECLAC), reveals that compared with 2007 figures the country shows a significant deterioration .
While up to May Finance revenue grew by 10% interannually, Central Government expenditure increased by 13.1%.
"Finance revenue grew by 10% interannually up to May, driven especially by the collection of income tax, tributes which recorded a growth of 11.7% in May," noted an article in Elfinancierocr.com.
"This increase in revenue pales in comparison to the rise of 13.1% in central government spending."
The Central American Institute for Fiscal Studies has concluded that only the public debts of Panama and Nicaragua, using official data, are sustainable in the medium term.
The main theme of the fifth edition of the 'Lente Fiscal Centroamericano' (Central American Fiscal Lens) is an analysis of debt sustainability in Central America, which depends greatly on interest payments on debt, economic growth, inflation, revaluation and management of the fiscal deficit.
In a worst case scenario, debt could climb to 50% of GDP within 2 years.
According to economist Thelmo Vargas, a partner at the consulting firm Ecoanálisis, the forecast is of a base scenario in which interest rates are 5%, the economy grows at a rate of 4% and a primary deficit of 3% is registered for production.
"However, in a scenario with more pessimistic assumptions, Government obligations could grow from 38.7% of GDP expected for 2013 to 50.3% of production in 2015," noted an article in Elfinancierocr.com.
Costa Rica could have a greater fiscal deficit than the 4.8% estimated by the Central Bank for this year, reaching 5.1% of GDP.
According to the Fiscal Studies Program by the School of Economics at the National University of Costa Rica, this projection was based on total tax revenues increasing by 8.7%, taking into account a lower tax income and Customs taxes (due to a fall in imports) and also an increase in total expenditure of 11.5%.
During the first month of 2013 government spending was 16% higher than in January 2012, while income rose by 8.4%.
Crhoy.com reports that "In general, the central government deficit during the first month of the year stood at 0.84% as a proportion of gross domestic product (GDP). Meanwhile, interest expenses increased in the order of 36%, whereas a year earlier it increased in the order of 10.1%. "
The annual imbalance between government expenditures and revenues grew by 0.3%. Expenses grew by 10.6% in 2012, 1.7% more than the increase in 2011.
A statement from the Ministry of Finance reads:
The financial deficit of the Central Government at the end of 2012 was 4.4% of GDP, equivalent to ¢1,003,098 million. This deficit is lower than that projected earlier this year (4.8%).
The primary deficit, which only takes into account regular revenues and expenses, excluding interest payments on existing debt, grew by 25.5% between January and November, reaching $970 million.
From the blog Pulso Bursátil by Aldesa:
Data on government finances to the end of November reveals nothing positive and, in contrast, shows an alarming growth rate for the year 2012.
In November, the balance between government revenues and expenditures showed a deficit equivalent to 4% of GDP.
In November the government deficit amounted to $ 1.82 billion, or 4% of the gross domestic product (GDP), the same level as in 2010. Nevertheless, in 2010 the shortfall was lower, at $ 1.52 billion. Of the $1.82 billion shortage the government needs to cover its running costs, $1.12 billion were financed with domestic debt and $700 million with external debt.
The 10% increase in revenues will offset the 9.5% increase in central government spending, leaving the fiscal deficit at 3.5% of GDP, slightly below the October 2012 cumulative.
A statement from the Ministry of Finance reads:
Government deficit to October is slightly lower than in the same period last year
• Net domestic financing of the government (including recourse to external debt amortization) was 4.2% of GDP, down from 4.3% in the same period of 2011
The increase in government spending in the first eight months of 2012 is even higher than the increase observed in the same period last year.
A statement from the Ministry of Finance reads:
• Deficit continues to grow despite efforts to control spending and reduce evasion
• Efforts to improve finance and control collections are strengthened
Tax revenues in the first eight months of the year reveal more dynamism in 2012 than last year.
In the first 7 months of 2012 revenue increased by 11.3%, but government spending continues to increase at a rate of 9.6% growth, just below the 10.4% recorded in the same period in 2011.
A statement from the Ministry of Finance of Costa Rica reads:
• The fiscal deficit persists despite efforts to increase revenue and reduce expenses.
• Eurobonds are still a necessary source of funding.
Two years ago we used the same title to report on the growing trend of the debt / GDP ratio in Costa Rica. Today the news is that this ratio has reached nearly 50%.
The consequences are as you would expect: upward trend in interest rates because the state must meet its cash needs competing for credit with the productive sectors, and reduced state investment, especially in infrastructure, which compromises the ability of the economy to grow.
This will be the second consecutive year that Costa Rica has the highest fiscal deficit in the region.
The International Monetary Fund states that the difference between revenues and expenditures of the government of Costa Rica at the end of 2011 amounted to 5.6% of GDP. The Finance Minister Fernando Herrero said that this deficit is 5%.
So far the country has had "some margin" in terms of the capacity to handle the deficit with debt, but economists point out that this gap will disappear if appropriate tax solutions are not found quickly.
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