Sunday 24 September 2023

Half of Ticos don’t have enough money, but they’re hopeful that Rodrigo Chaves will help turn things around.

Personal finances will be better in a year according to 45% of Costa Ricans

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23 September 2023 - At The Banks - Source: BCCR

Paying the bills


QCOSTARICA — Almost half (47%) of Costa Ricans surveyed indicated that they do not have enough money to last until the end of the month, and they must find additional sources of income to cover bills and provide food for their households.

In July, unemployment dropped to its lowest rate in the last five years, standing at 9.6%, while the Juan Santamaría Airport reported a record number of passengers.

Thousands of households are finding solutions to their financial difficulties through the use of credit cards, debt relief, loans from friends, or loans with incremental payments.

However, it is not all doom and gloom, as Costa Ricans have high expectations of Rodrigo Chaves’ leadership in the coming year.

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In fact, 33% of Costa Ricans trust that the country’s economy will improve and that their personal finances (45%) will get a boost, while only 6% fear that their situation will deteriorate, according to the analysis of situation carried out by the Índice, led by researcher Iván Barrantes.

Barrantes commented that it is possible to have varying levels of optimism despite current circumstances. He likened it to a marriage, in which people may not have much in terms of money, but have a high expectation of a better future.

That optimism is based on Rodrigo Chaves’ professional background as an economist as well as his extensive international experience, thus Costa Ricans anticipate that his most significant contribution will be a thriving Costa Rica, with job openings, more businesses, and an affordable cost of living.

A few months to the end of 2023, everything seems to indicate that Chaves is advancing on that path.

On the one hand, the economy is projected to grow at 4.2% and not 3.3% as initially forecast by the Banco Central (Central Bank), while year-on-year inflation went from 12% to -2.3% in the last year.

The rate of unemployment in July 2023 was the lowest it had been in the past five years, standing at 9.6%. Additionally, the Juan Santamaría International Airport (SJO) – Costa Rica’s main international airport – saw the highest number of passengers in the last 14 years.

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Then there is the work by the Ministerio de Hacienda (Ministry of Finance) achieving a primary surplus for the first time in a prolonged period, which is largely due to the exceptional tax collection.

“There is news that inflation is zero and that Costa Rica is the OECD champion in this matter, in addition to other favorable indicators in employment and investment, but the question is, will the purchasing power of Costa Ricans improve, or is this a systematic and emphatic speech of the government only to help create the expectation?”, expressed Barrantes.

Meanwhile, economists consulted, denied that the economy “is smooth sailing”, although they do consider the expectations rosy.

And it is that deep-seated problems such as unemployment and the need to bring wealth and employment to all sectors and regions of the country persist.

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“The government’s management of the economy has some areas that require attention. Recovery is not smooth; The economy in general is growing a lot, but it is highly concentrated in the zona franca (free zone) regime. Meanwhile, the companies under the definitive regime are having very mixed results and in some cases there is stagnation,” said Fernando Rodríguez, former Vice Minister of Finance and professor at the Universidad Nacional (UNA).

Sectors such as commerce (trade) and agriculture, which employ a large number of people, are lagging behind, added the former Vice Minister, who highlighted the unemployment problem as an issue that should be analyzed more carefully.

The recommendations that Rodríguez makes do not imply bad management, but that adjustments are required to promote greater benefits.

“Fiscal stability and price stability achieved, basic components of a country’s competitiveness, as well as the very expectations of economic growth, are promising. This leads us to deduce that, if we continue on this path, we will see a favorable economic performance”, explained Melvin Garita, Deputy General Manager of Strategy at the Banco Nacional (BNCR).

In this sense, Gerardo Corrales, Economist at Economía Hoy, added that the positive growth figures that are projected are mainly driven by the free zones, but that the lowest-income bracket is not experiencing the drop in inflation as the items that have decreased in price are not consumed by this sector.

“Inflation has reached a negative price level, while the unemployment rate has been falling, and the economy is growing. However, when looking deeper, it is seen that the productive behavior of the definitive regime is not the same, since there are sectors that are suffering more. Industry is declining and trade and agriculture are practically stagnant. In addition, inflation has benefited higher-income strata, because, in the low-income strata, food prices does not fall in the same proportion that they rose in 2021 and 2022; what is falling in prices are air tickets, new cars, fuels, and internet,” Corrales said.


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