Saturday, 28 November 2020

Costa Rica Five Years Of Red Ink

stock-marketQCOSTARICA – Costa Rica closed out the books on 2014 with its fifth year of a deficit higher than 4%. This has alreasdy had its effect on the nation’s investment risk assessment by Fitch’s international rating system, which will impact in the interest rates on loans the government floats.

According to Finance Minister Helio Fallas, the exact figure was 5.6% of the country’s Gross Domestic Product — not as damaging as its more than 6% in 2008 during the worldwide recession but still disappointing. President Solis resorted to parliamentary strategy to avoid reducing his record budget as lawmakers wanted.

The figure this year is the highest since 1980 when the deficit was 8% of GDP, according to La Nacion. This is less, said Fallas, than the 6.3% budgeted and less than was predicted by the Central Bank. However, he noted that there has been a change in the methodology of measuring the deficit.

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But former Finance Minister warned that the deficit is not sustainable and if the government is serious about avoiding a national crisis, some brakes on spending must be applied. He repeated the warning of economists in the past that the danger in the accumulation in debt would sharply increase interest paid on loans.

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