Costa Rican Economic Activity Will Pick Up In 2021, To Fully Recover By 2022

• Following the 1.6% y-o-y contraction in Q121, Costa Rican real GDP is expected to return to growth from Q221 onwards as private consumption and investment levels recover following the COVID-19 pandemic. 
• Fitch Solutions forecasts growth of 3.2% in 2021 and 3.3% in 2022, implying that GDP will not regain the pre-pandemic level of output until 2022 following the 4.5% contraction in 2020. 
• Last year, the economy posted its first annual contraction since 2009 as the coronavirus pandemic depressed private consumption, investment and exports. 
• In addition, the government’s limited ability to spend in 2020 capped its fiscal stimulus package, contrasting with many other Latin American governments that enacted countercyclical measures to blunt the economic impact of the pandemic.  
• In the longer term, austerity measures tied to the government’s January 2021 IMF deal will likely constrain public consumption and growth. In January the IMF mission and the Costa Rican government reached a staff-level agreement on a three-year program to anchor the government’s policy and reform efforts, aimed at bolstering the country’s response to the pandemic and at laying the foundation for a strong and durable economic recovery. The arrangement is under the Extended Fund Facility (EFF) for about US$1.75 billion.

(Source: Fitch Solutions & IMF)