Friday 27 January 2023

Costa Ricans will take longer than the average of countries to recover their economic well-being

Dependence on a hit activity such as tourism and low fiscal stimuli are factors are the cause in slowing the return to pre-pandemic levels, which is not expected until the second quarter of 2023

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QCOSTARICA – Costa Rica will not have an economic recovery at pre-pandemic levels in terms of GDP per capita until the second quarter of 2023, when most countries will already have it at the end of 2022, according to the Organisation for Economic Co-operation and Development (OECD).

It should not be forgotten that tourism affects other activities as it generates many chains, such as hotels, restaurants, transportation and others, according to Roxana Morales, an economist at UNA. Image: La Republica

GDP per capita is used to demonstrate the well-being in terms of economic conditions of a country.

The fact that for the OECD itself we would be among the countries that are already close to recovering pre-Covid-19 production levels should not be confused, since these estimates refer to GDP and not the average income of each person, being the GDP per capita.

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In 2020, the GDP per capita of Costa Rica was US$12,076,815, while in 2019 it culminated in US$12,669,706, estimates the World Bank.

What will delay recovery?

The comparisons are complex since each country has differences in its economic model and, especially, its dependence on the international market; In this last point, we depend on external aspects such as tourism and export promotion – which fortunately are constantly improving their placement.

“It depends on the capacities of each country, tourism contributed 6% of GDP and this is one of the activities that will recover very slowly,” said Roxana Morales, an economist at UNA on an aspect that takes its toll on us.

In OECD assessments, another factor is the overall strength of a country’s health infrastructure.

More advanced economies tend to have more ICU capacity, and simply more hospital staff; traits that help better manage the pandemic, with fewer restrictions and rapid recovery, hence, countries such as Japan or the United States are already forecasting their recovery this year.

Another point is the level of government support and fiscal stimulus in different economies, which does not stop determining how quickly they recovered.

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Since, just as a disparity in vaccine launches was reported, there was a significant fiscal stimulus gap, especially during the most tense moments due to Covid-19.

In this sense, an IMF analysis estimated that Costa Rica’s fiscal stimuli during the pandemic are among the lowest in the world.

These supports in the economy and in health reach 1.4% of GDP, far from, for example, New Zealand which has made a contribution of 19.1% of its GDP.

Only Mexico and Turkey have a lower contribution than our country, precisely the former would have a recovery even later than Costa Rica.

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