Country Report Costa Rica January 2013

Country Report Costa Rica January 2013

Outlook for 2013-17

• The government of the president, Laura Chinchilla, will continue to face low public support and strained relations with the opposition, complicating its ability to pursue its reform agenda up to the end of its term in 2014.
• Despite its low popularity, the Economist Intelligence Unit expects the ruling Partido de Liberación Nacional (PLN) to win the 2014 elections, owing to disarray among the opposition.
• The government's commitment to maintaining spending programmes will lead to an average fiscal deficit of 4.3% of GDP in 2012-13, before higher GDP growth and an increased tax take narrow the deficit to 1% of GDP by 2017.
• A strong performance in the first half of the year will support GDP growth of 4.9% in 2012. GDP growth will moderate to an annual average of 4.3% in 2013-17, supported by solid investment.
• Inflation will remain within the present target range of the Banco Central de Costa Rica (BCCR, the Central Bank) of 4-6% during 2013-17, assuming that global commodity prices do not rise above current forecasts.
• The colón will stay strong in the short term (bolstered by a weakened dollar, and Eurobond inflows), depreciating gradually to C521:US$1 by end-2017.
• The current-account deficit will remain high, at 5.7% of GDP by 2017, although it will be financed by inflows of foreign direct investment.

Review

• A Supreme Court judge's re-election to office was rejected by a qualified majority in the Legislative Assembly, leading to legislative friction between the ruling party and the opposition.
• The government has changed the methodology used to calculate the Tasa Básica Pasiva (TBP, a weighted average basic borrowing rate) and is looking for other ways of bringing rates down, such as through external borrowing.
• Consumer confidence hardly budged in November as the government's low approval rating was reflected in stagnating confidence over the course of the past year, despite strong growth.
• Consumer prices rose by 5.2% year on year in November, driven mostly by domestic factors, including a cigarette tax. However, accumulated inflation has been just 4.5% for the year as a whole.

Do to the nature of this product there is no table of contents.