What to Expect About Exchange Rates, Inflation and Interest Rates In Costa Rica

• The Costa Rican economy continues to stand out for its resilience and capacity for growth. Despite global instability, with wars in Ukraine and tensions in the Middle East, as well as the escalation of geopolitical disputes between China and the United States, Costa Rica achieved growth of 5.1% in 2023.

• Although moderation is anticipated for 2024 and 2025, with rates expected to exceed 3.5%, the country continues to take advantage of opportunities to maintain sustainable economic development, despite external and internal challenges.

• “Despite the fact that the international economy is going through a moment of fragility, we have seen that the Costa Rican economy has continued to grow at good rates. This is due, in part, to a projected slowdown for the North American economy, which continues to be our main trading partner, source of investment and tourism. Also influencing is the appreciation of the exchange rate, which is affecting some sectors, and the normalization of household consumption, which was very high in 2023,” said Rodrigo Cubero, former president of the Central Bank.

• “If there is very strong pressure to increase the exchange rate, the Central Bank will possibly move its monetary exchange rate policy instruments to prevent a very disorderly, rapid and violent adjustment in the exchange rate, especially upwards, endangering its inflation target. We would see an exchange rate that will possibly remain with a slight upward trend, but fluctuating at levels that this year could range between 520 and 540 colones per dollar,” added Cubero.

• The interest rate in Costa Rica in colones is highly determined by the Monetary Policy Rate (MPR) of the Central Bank. At this time, the MPR is at 4.75% and the Central Bank has expressed that it does not anticipate that it will move before the United States Federal Reserve does so, which is expected from September.