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North & Central America and Caribbean
Costa Rica |
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Last reviewed: 18 August 2009 |
Country information
ECONOMY
Basic Economic Facts
Nominal GDP: US$26.27 billion (2007) US$35.1 billion (2008)
Nominal GDP per head: US$5,869 (2007) US$ 6,710 (2008)
Annual growth: 7.8% (2007) 3.5% (2008)
Inflation: 9.5% (May 2009) 13.9 % (2008)
Major industries: Electronic components, bananas, coffee, textiles and apparel, fruits, jewellery, small appliances, shrimp. tourism, pharmaceuticals
Exports: US$9,675m (2008)
Imports: US$153711m (2008)
Statistics
Year-end figures for 2008 showed a sharp drop in economic growth of approximately 5% on the previous year to 2.9%. The small fiscal surplus of 0.2% of GDP in 2008 is predicted to reverse to 2007 levels and deficits of 4.5% of GDP in 2009 , and overall debt is currently at $11.7 billion (including $7.4 billion of external debt).
Free Trade Agreements (FTAs): Costa Rica has FTAs with Central America (not Panama), Mexico, Chile, the Dominican Republic and Canada and with CARICOM countries of the Caribbean. Ratification of the US-Central American Free Trade Agreement (CAFTA) entered into force on 1st January 2009 although the positive effects of this have been muted by the global downturn and resultant reduced investment flows and export demand.
Although the smallest country in Central America in terms of population, Costa Rica is one of the most affluent on a GDP per capita basis. The economy has weathered low world commodity prices for traditional Costa Rican exports such as coffee, bananas and sugar by diversification. Non-traditional exports such as electronic components (particularly Intel microchips), medical supplies, textiles and tropical fruits, as well as tourism, now play a much more important role. The impact of the global increase in food prices has seen some items increase by up to 30% and will begin to have an impact on the economy. Average GDP growth was around 2.5% per year since 2000, but it rose some 4.1% in 2005 and 6.8% in 2006 and 2007 which has allowed Costa Rica to weather its high levels of internal and external debt. Interest on this debt consumes a third of the annual budget. A fiscal reform package designed to increase tax revenue and measures to regulate government spending failed to pass through the Legislative Assembly during the Pacheco administration.
Moves towards regional economic integration in Central America are continuing. In early 2004, the 5 Central American countries concluded negotiations with the USA on the Central American Free Trade Agreement (DR-CAFTA). Known in Spanish as the TLC (Tratado de Libre Comercio), the agreement was signed between the USA and Costa Rica, Guatemala, El Salvador Honduras, Nicaragua and the Dominican Republic. El Salvador was the first country to ratify the agreement in December 2004, followed by Honduras and Guatemala. Violent protests greeted the ratification in Guatemala and Honduras.
On 7 October 2007 Costa Ricans went to the polls, in the first ever referendum in their history, to determine whether Costa Rica should ratify the Central American Free Trade Agreement (DR-CAFTA). The result was 51.6% to 48.4% in favour of the free trade deal with the US. The 60% electoral turnout was widely hailed as a triumph for democracy and public engagement.
Costa Rica continues to attract foreign investment because of the basic stability and security of the country. 2007 was a record year in foreign investment reashing US$1,884.6 million, driven by investment in tourism and construction. The Colon has been devaluing against the US Dollar on average 10-11% per year since 2000 except in 2007 when the rate was reduced to only 1.5%.
