Costa Rican Growth Momentum to Fade In 2022 As Consumption, Investment Slow

  • Costa Rican growth is expected to slow to 3.3% in 2022, from an estimated 5.9% in 2021, as favourable base effects fade and external demand softens. Costa Rica has rebounded from the COVID-19 pandemic at a faster pace than was initially anticipated, largely due to surging export growth and strengthening domestic activity. As such, Fitch has revised its 2021 growth estimate, from 3.9% previously, implying that the Costa Rican economy fully regained its pre-pandemic size by end-2021. 
  • From 2022 onwards, growth will decelerate, bringing it closer to the 3.2% average growth rate from 2015-2019. Costa Rican exports will likely expand at a less vigourous pace as global growth slows, while it is expected that tighter fiscal and monetary policy will temper consumption and investment in the short-to-medium term. 
  • Costa Rica’s comprehensive COVID-19 vaccine roll-out will help bolster business and consumer confidence over the coming quarters as the government phases out public health restrictions. As of January 10, 69.9% of the population was fully vaccinated, the highest rate in Central America. In turn, this will also push down unemployment. 
  • Nevertheless, households likely made large-scale purchases in 2021 as stores reopened. However, as base effects dissipate and the government implements fiscal consolidation measures in line with its 2021 IMF agreement, consumption will slow in the coming quarters.

 (Source: Fitch Solutions)