BMI Fitch Solutions Posts Costa Rica Risk Report

• On March 30, 2026, BMI (a Fitch Solutions Company) published its quarterly Costa Rica Country Risk Report, which assessed the economic and political risk profile of the sovereign. The report highlights political stability following the February 2026 election, a positive economic outlook, but noted risks including fiscal consolidation pressures, elevated exposure to US demand and rising crime.
• Costa Rica held its presidential election on February 1, 2026, with President-elect Laura Fernández taking office on May 8 with a working legislative majority of 31 out of 57 seats. This administration is expected to maintain broad policy continuity with the Chávez administration, particularly with regards to fiscal consolidation and a hardline approach to crime.
• On the economic front, Fitch noted tht following a strong post-pandemic recovery, Real Gross Domestic Product (real GDP) is expected to grow by 3.9% in 2026. This is a moderation from 4.6% in 2025 toward the pre-pandemic trend of 3.8%, with private consumption and the manufacturing sector, which accounts for roughly 70.0% of total exports, remaining the primary drivers of activity.
• Meanwhile, despite progress in recent years, supported by a primary surplus of around 1.0% of GDP in 2025, fiscal consolidation is expected to stall in 2026 with the deficit widening slightly to 3.6% of GDP. This will result in a sharp slowdown in revenue growth. In 2025, total revenues grew just 0.8%. Moreover, spending remains highly rigid, with wages, transfers, and interest payments accounting for close to 90.0% of total expenditure. As a result, the pace of consolidation is expected to remain gradual, with the incoming Fernández administration signalling continuity with the current fiscal framework rather than introducing new measures to accelerate deficit reduction.
• The report also touched on expectations for Costa Rica’s monetary policy. The Central Bank of Costa Rica held its policy rate at 3.25% on March 26 despite market expectations for a cut and is forecast to deliver an additional 25 basis point reduction to 3.00% in the second half of 2026. This outlook is underpinned by rising global oil prices and resilient domestic activity, both of which limit the case for more aggressive easing. The Monthly Economic Activity Index expanded by 4.8% year-on-year in January 2026, supporting the growth outlook.
• Separately, its current account deficit is projected to widen modestly to 1.9% GDP from 1.6% in 2025. This expectation is driven by a growing goods trade deficit as import demand holds up and a stronger colón weighs on export competitiveness. This will be supported by a large services surplus and robust Foreign Direct Investment inflows, with gross international reserves at US$11.9Bn as of February 2026.
• Notwithstanding the positives, there are some key risks to Costa Rica’s economic outlook. This includes a heavy dependence on United States demand through exports and FDI, leaving the sovereign vulnerable to any slowdown from the U.S. Persistent colón strength, weighing on export competitiveness and rising crime, is also adversely impacting investor confidence. Finally, high public debt constrains fiscal flexibility, while longer-term structural bottlenecks in infrastructure and labour market productivity risk capping the economy's growth potential over the medium term.

(Sources: BMI, a Fitch Solutions Company)