Costa Rica GDP Set to Improve in 2024

• As with most other Central American markets, the improved outlook for US growth in 2024 will have positive effects on the Costa Rican economy - particularly on exports. Furthermore, economic risks have moderated somewhat in Costa Rica in recent months.
• Inflation has been falling persistently (partly due to a strong rally in the Costa Rican Colón), which bodes well for private consumption, while an ongoing interest rate cutting cycle will reduce borrowing costs, support business sentiment and help to lift fixed investment.
• That said, Fitch has raised its 2024 real GDP growth forecast for Costa Rica from 2.5% to 3.1%, with H1 2024 likely to be particularly strong, before a slowdown in H2 2024 as the US economy loses steam and public spending in Costa Rica stagnates.
• Notwithstanding, while Costa Rica faces less substantial political risks than many of its peers in Central America, those risks have been rising in recent months.
• The country has seen a series of protests due to frustration with public services and President Rodrigo Chaves' fiscal consolidation agenda, which will remain in place as the country seeks to comply with an IMF-backed reform programme. The country also faces notable security challenges, with rising gang activity and homicide rates, as well as a state of emergency due to a sharp increase in migration.
• However, falling inflation and strong growth should help cap the level of social discontent, aided by the stability of the country's democratic institutions.

(Source: BMI)