In the second quarter of 2019, Costa Rica’s Gross Domestic Product (GDP) grew 1.4% year-on-year, below the 3% reported for the same period in 2018, the Banco Central de Costa Rica (BCCR) – Central Bank – reported.

Economy maintains a tendency to slow down in the last months of the year

The BCCR said that “a continuing a loss of dynamism observed, mainly associated with the evolution of domestic demand and, to a lesser extent, with the external demand for products made by companies of the definitive regime, since sales of medical equipment and implements and services maintained the momentum of the previous quarter.

The report explains that “… External demand reflected the dynamism in exports of services (business management, information technology and design of devices for dental treatment as well as the entry of tourists) and sales of medical supplies (special regime), which mitigated the contraction in sales of the final regime because of a lower exportable supply of bananas, pineapples and coffee, as well as the negative impact that the social-political situation in Nicaragua caused on trade flows of this group of companies, with the Central American region.

“Household final consumption grew 1.4%, a rate that although positive is lower than the average annual variation of the last two years (2.4% in 2017-2018), which was consistent with the results of the Consumer Confidence Survey, prepared by the University of Costa Rica (UCR), which so far this year has shown an increase in pessimism. Likewise, this result was congruent with the lower growth of credit to the private sector for consumption (2.5% from 5.9% in the second quarter of 2018), the behavior of real disposable income and the unemployment rate (11.3%).

“On the other hand, the balance of payments presented a current account deficit equivalent to 0.6% of annual GDP, which although was 0.5 percentage points lower than that observed in the same period of 2018 and financed with direct investment; It led to a reduction of USD 543 million in the balance of net international reserves (RIN) given the net outflow recorded in public capital flows.

“Gross fixed capital formation deepened its fall (-6.9% from -1.6% in the previous quarter), mainly because of lower spending on non-residential private works for commercial purposes. Also influenced by the reduction in investment in industrial and transportation equipment.”

See full report in Spanish.