Costa Rican Growth To Decelerate In 2023 On Lower External Demand

• Fitch forecasts Costa Rican real GDP growth will decelerate from 4.3% in 2022 to 2.8% in 2023 due to a challenging near-term US growth outlook – Costa Rica’s key export partner.
• Much of the deceleration will be driven by net exports, which will now contribute just 0.3 percentage points (pp) in 2023 compared to 3.1pp in 2022.
• The US is Costa Rica’s most important trading partner, typically serving as a destination for just under half of Costa Rica’s total goods exports and well over half of the country’s total annual visitors. The anticipated slowdown in the US will feed through to less growth in both goods and services exports in the months ahead.
• That said, domestic demand will keep headline growth roughly in line with the 10-year historical average (3.1%) as both inflation and unemployment fall.
• Furthermore, Fitch expects fixed investment growth will pick up on the back of the Banco Central de Costa Rica’s (BCCR) recent rate cuts.
• Fitch sees fairly sizable risks that the mild recession in the US could take place at the start of 2024 instead of Q423, in which case the drop in external demand for Costa Rica would be shallower than Fitch initially anticipate.  

(Source: Fitch Solutions)