Costa Rica Economy in Readjustment Phase

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The Costa Rica News (TCRN) – The Costa Rica economy has slowed in a readjustment phase due to a continuing global economic slowdown.

First quarter 2015 production growth in Costa Rica is struggling. Annual growth in February 2015 was 2.2 percent, while the year before in 2014 it was 3.7 percent. Several factors explain this lower growth rate.

Global Factors Effecting Costa Rica

Costa Rica is a small economy and its development and economy does depend heavily on global economic performance which has remained in a slow recovery process that is still sensitive and volatile.

According to conference-board.org, the global economic outlook was revised for real global GDP growth average and now is projected to be 3.3 percent for 2015 – remaining slightly below the 3.4 percent we projected last November. This global average revision reflects a combination of upsides and downsides.

Declination revisions were reflected from struggling countries like Russia (from +0.8 to −3.5 percent) and moderate declines in the Euro Area (1.6 to 1.4 percent), Japan (1.1 to 0.6 percent), and Brazil (1.5 to 0.5 percent).

Upward revisions included the USA (2.6 to 2.9 percent), India (5.5 to 5.9 percent) and Mexico (2.8 to 3.5 percent).

In general for 2015 the Latin America is showing lower economic growth this year, but this comes after years of phenomenal growth rates for the entire region. The United States economy has been chugging in the first quarter of this year further effecting capital flows into the Latin America region, as well, slower than expected growth in emerging and developing countries is effecting Latin America’s growth rates overall.

These factors are reflected here in Costa Rica with is a slowdown across the spectrum of the economy. Except for the construction sector all other economic sectors have shown a decrease.

Fiscal policies are struggling within Costa Rica’s newly elected administration and will be further compromised over the coming year after the Legislative Assembly was recently taken over by opposition.

Credit to the private sector has also slowed even with reduced interest rates from the Central Bank; however lending to construction developments has improved in 2015.

While the Costa Rica Colón was recently recognized as the western hemispheres best performer, but because Costa Rica’s private banks hold most of their capital in dollars, the currency gains actually cost Costa Rica.

In conclusion, while so far in 2015 Costa Rica shows a slow production growth rate, the public infrastructure has improved and as well, significant progress has been made in improving the red tape for public entities seeking expansion and growth. The governing administration remains hopeful that measures being taken in this readjustment phase will pay positive dividends in the last half of 2015.

The Costa Rica News (TCRN)
San Jose, Costa Rica