What Is Stagflation and How Can It Affect the Costa Rican Tourist Activity?

The current situation in Costa Rica in terms of inflation is a problem that has left much damage. But the most obvious is the increase in the price of products and services, starting from the basic basket; if you add to this the stagnation of the economy, higher unemployment, and, therefore, less income to be able to buy. The result is a fairly large economic gap that affects many areas, including tourism.

The combination of stagnation and inflation is what economists call stagflation, and the first thing it does is put strong upward pressure on the US dollar exchange rate. Normally, the increase in this is more than the increase in fixed and input costs. But, in general, it has a quite negative effect on all economic activities.

“In the case of tourism, although operating costs and most of the inputs are indeed increased, by charging a high percentage of our income to international tourists in dollars, we defend ourselves a little more than many other activities. and our actions achieve a positive national effect by putting downward pressure on the dollar exchange rate due to the increase in dollar income, which is a very important facet to mitigate inflation”, explained Bary Roberts, a renowned Costa Rica Tourism businessman.

Consequently, as long as the impact of stagflation does not reach unmanageable levels in the main originating destinations of national tourism, sustained tourism growth will continue. “Fortunately, at this time, the vast majority of tourists who come to us come from the United States, which is the country with the greatest capacity to deal with this financial problem without greatly damaging the income of its citizens. Particularly in the medium-high and high economic strata, which are also fortunately where most of the North American tourists who visit us come from”, Roberts said.

Based on all this, a group of Costa Rican tourism businessmen calls on their fellow tourism businessmen who benefit from the devaluation, to show solidarity with their employees and families by raising their salaries accordingly, in addition to urging the national population to buy products and services that are primarily local. “It is precise, at times like these, that the country must become aware of how strategically important tourism is for the national economy and, therefore, defend and promote it and tourism entrepreneurs assume the responsibility that corresponds to us”, Roberts concluded.