Fitch Sees Weak Costa Rica Public Finances, Untested Fiscal Rule
- Fitch affirmed Costa Rica’s B+ rating with a negative outlook on “weaknesses in public finances and political gridlock that has prevented the timely passage of reforms addressing these”.
- Government’s fiscal deficit to widen to 6.3% of GDP this year and remain above 5% of GDP until 2023: debt-to-GDP will climb to 71% by 2023
- Fitch estimates sovereign financing needs of 10.3% of GDP and 13% of GDP 2021 and 2022. Economic growth to slow to 2% in 2019 and stay below 3% in 2020-21 on costs of new VAT tax and weak consumer confidence. They also see risks around compliance with new fiscal rules. Expenditure reduction required under the fiscal rule is currently facing political and social resistance.