Q COSTA RICA — Although the Costa Rican economy is far from showing negative figures, several warning signs are raising concerns.
For example, the decline in the manufacture of medical equipment and electronic components in free trade zones has resulted in Costa Rica experiencing two consecutive months of economic growth below 4%.
This meant that, at the end of May, economic activity grew by only 3.5%, according to the most recent Monthly Index of Economic Activity (IMAE) from the Banco Central de Costa Rica (BCCR) — Central Bank of Costa Rica.
The main factor in the slowdown was the reduced dynamism of the free trade zones, whose special regimes grew by 3.8%, “but with a drop of 12.8 percentage points compared to the same month in 2015,” the report explained.
In this case, the special regime had experienced double-digit growth for years, and now, suddenly, its growth has stalled.
Meanwhile, on Monday, the Ministerio de Hacienda (Ministry of Finance) announced a further decline in revenue.
Total revenue reached ¢3005 billion colones as of May 2026, representing a cumulative decrease equivalent to 0.1% of 2026 GDP, compared to May 2025.
When comparing the revenue-to-GDP ratio, it fell from 6.0% in 2025 to 5.7% in 2026, a reduction of 0.2 percentage points.
The net cumulative decrease in total revenue was ¢58.29 billion compared to the same period in 2025. This decline is mainly explained by the negative performance of tax revenue (2.5%), current transfers (2.7%), and non-tax revenue (0.8%).
As if this weren’t enough, the Economic and Social Observatory (OES) of the School of Economics at the National University (UNA) has indicated that “internal and external pressures on the Costa Rican economy make an increase in local prices imminent,” which will be felt in people’s wallets in the coming months, due to the trade war between the United States and Iran.
Finally, the employed population in Costa Rica has gone almost a year and a half without registering significant growth, according to data from the National Institute of Statistics and Census (INEC).
For the months of March, April, and May, the employed population stood at 2,176,137 people, which represents a reduction of 22,820 workers compared to the same period of the previous year, when the figure was 2,198,957.
What is happening?
The first thing to clarify is that this is not the government’s fault, but rather the result of several internal and external factors affecting the economy.
The first of these is related to the war in the Middle East, which translates into inflationary pressures.
Likewise, the potential imposition of a 15% tariff on all Costa Rican exports to the United States is generating uncertainty among investors, who, according to experts, prefer to keep their decisions on hold, thus affecting the special economic regime.
“When calculating inflation, one looks at past behavior and considers future risks, which remain significant in terms of their potential to materialize. We can’t celebrate prematurely yet; the situation in the Middle East has historically proven to be very fragile, and ceasefires are difficult to maintain in many circumstances,” said Fernando Rodríguez, a researcher at the National University (UNA).
Regarding tax revenues, Víctor Carvajal, Vice Minister of Revenue, acknowledged that the drop in the dollar exchange rate has affected tax collection, since the decline in profits for companies associated with the tourism, export, and foreign investment sectors reduces both the profits and the taxes the government can collect.
“If we have some major taxpayers who are experiencing a foreign exchange loss due to the lower exchange rate, then obviously there is lower income tax payable. The low exchange rate affects us,” Carvajal admitted.
On Thursday, July 16, the dollar closed at ¢450.31 in the Foreign Exchange Market.
Given this situation, Finance Minister Rodrigo Chaves previously stated that the entire government will tighten its belt by 2027.
“The time for leniency is over. We, all of us who work for the Costa Rican government, will tighten our belts—not just the government, not just the Ministry of Transportation, not just the Ministry of Agriculture, but all state institutions: the Judiciary, the Legislature, and the Executive,” Chaves said.
The Finance Minister emphasized that resolving public finance problems requires not only effective tax collection but also improved efficiency in public spending.
“There will be cuts for everyone. There are no privileges here. (…) The people of Costa Rica will not be robbed, not through bidding processes, not through tax evasion. (…) Technologies developed by Mossad in Israel are being used to detect smuggling in this country through imports,” Chaves concluded.