Tuesday 3 October 2023

Costa Rican Economy Keeps Slowing Down

According to the latest reports inflation in Costa Rica keeps on rising, and hiring expectations worsening

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Dollar Exchange

¢533.49 BUY

¢540.31 SELL

03 October 2023 - At The Banks - Source: BCCR

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The Monthly Economic Activity Index (Indice Mensual de Actividad Economica – IMAE) by the Banco Central de Costa Rica (BCCR), reported a 1.6% year on year increase in April, a variation that is lower than the 1.8% growth reported in March.

According to the latest reports inflation in Costa Rica keeps on rising, and hiring expectations worsening

Excluding financial services and electricity and water, the rest of the economic activities grew less, or even had negative variations with respect to the previous year, as in the case of the agricultural industry, construction and trade, reported the Central Bank.

The report states that “… This slowdown in national production is explained by both external and internal factors, among which stand out:

  1. The slowdown in the economic growth of our main trading partners;
  2. The fall in the prices of some of our main agricultural export products;
  3. The increase in the price of oil so far this year;
  4. The political-social situation in Nicaragua, which has resulted in an extreme recession in that country and which has impacted Costa Rica’s exports to that country and to the rest of Central America;
  5. The adverse climatic shocks that have affected agricultural activity; and
  6. Low levels of consumer and business confidence.
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Manufacturing, business services, education and health together account for approximately 60% of April’s year-on-year growth.”

See the full report (in Spanish)

Inflation Keeps Rising in Costa Rica

After the year-on-year variation of the Consumer Price Index (CPI) between January and March of this year will range between 1.4% and 1.7%, and during April inflation was 2.1%, in May the inflationary rhythm rose to 2.3%.

The groups with the greatest contribution to the variation of the CPI in May were: Transport and Entertainment and culture, explains the report of the National Institute of Statistics and Censuses (INEC).

The document states that “… Of the 315 goods and services that make up the consumption basket, 45 % increased in price, 44 % decreased in price and 11 % showed no variation.

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During May, the goods and services showing the greatest positive effect were: gasoline, onion and university education. On the other hand, cars, tourist packages and accommodation services were among the main ones with the greatest negative effect.

In May of the last ten years, the highest year-on-year change was 6.23% in 2010, while 2016 saw the only negative year-on-year change (-0.43%).”

See the full report (in Spanish)

Worsening Hiring Expectations

For the third quarter of the year, 8% of companies in Costa Rica anticipate a reduction in their payrolls, and only 9% plan to hire new staff.

Areas of shared services, manufacturing, communications and transportation have the greatest expansion plans, according to Dahiana Arias, country manager of Manpower Group.  Photo La Republica
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For the third quarter of 2019, only 9% of companies in Costa Rica expect to increase their payrolls, well below the proportion of companies (12%) that expected to increase their payrolls during the second quarter.

Costa Rican employers report moderate hiring intentions for the third quarter of 2019. 9% of employers expect an increase in their workforces, 8% anticipate a decrease and 80% remain unchanged, resulting in a Net Employment Trend of +1%, details the ManpowerGroup report.

The report states that “… Employers in four of the six regions expect increases in hiring levels over the next three months. The strongest labor market is expected in Alajuela and Heredia, with Net Employment Trends of +8%. S

an Jose employers forecast moderate increases in the labor force, reporting a +6% Trend, while the Trend in Cartago remains at +3%. However, employers in Guanacaste and Puntarenas & Limón expect to reduce their workforces, reporting Trends of -4% and -2%, respectively.

Increases in workforces are anticipated in five of the six industrial sectors for the July-September period. Employers in the Services sector report the strongest hiring intentions with a Net Employment Trend of +10%.

On the other hand, hiring opportunities are expected for the Communications & Transport and Construction sectors, with Trends of +7% and +5%, respectively, while the Trend for the Manufacturing sector is +4%. However, employers in the Agriculture, Fishing, Mining & Extraction sector expect cuts in their workforces with a trend of -4%.

Employers in three of the four organizational sizes expect increases in their workforces during the next quarter. Large companies report the strongest hiring intentions with a +9% Net Employment Trend, while Trends remain at +8% and +4% for Medium and Small businesses, respectively. Meanwhile, Microenterprises expect to reduce their workforces, reporting a -5% Trend.”

See the full report (in Spanish)

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