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Costa Rica GDP will grow by 2.8% in 2023 and 3.0% in 2024. The contribution of domestic demand to growth will moderate in 2023 due to monetary policy tightening and weak labour market conditions. External inflationary pressures are expected to fade due to the easing of commodity and transportation prices and the appreciation of the exchange rate, with inflation projected to fall to 2.4% in 2023 and be at the target rate of 3.0% in 2024. The fiscal stance will continue to be restrictive over the projection period as the fiscal rule contains public spending. Monetary policy is expected to ease further, with a gradual decline in the monetary policy rate, as inflation is already within the tolerance band. Increasing female labour participation, by expanding the coverage of early childcare and education, and establishing virtual one-stop shops to reduce the cost to start a company, would support higher growth and equity. Economic activity is slowing down amid decreasing inflation Economic activity kept softening in 2022 and early 2023 with the Monthly Index of Economic Activity recording an increase of 4.0% (year-on-year) in March 2023 (+10.2% in March 2022). Private consumption has suffered from high inflation, monetary policy tightening and softer labour market conditions in the second part of 2022. Lower investment in the construction sector, due to the rise in interest rates and the postponement of public investment in infrastructure, weighed on gross fixed capital formation.
Costa Rica
1. The horizontal dashed black line indicates the target inflation rate of monetary policy, and the shaded area the tolerance band around the target (2-4%). Headline and core indicate, respectively, the headline consumer price inflation rate and the core consumer price inflation rate. The core consumer price inflation rate measures consumer price inflation excluding food and energy components. 2. The horizontal blue and green dashed lines indicate the average participation and employment rates computed over the period January 2010 - December 2019. Source: Banco Central de Costa Rica. StatLink 2 https://stat.link/ulkaxm
OECD ECONOMIC OUTLOOK, VOLUME 2023 ISSUE 1: PRELIMINARY VERSION © OECD 2023