Tuesday 6 December 2022

The “rebound” effect boosted growth in Costa Rica’s economic activity

The interannual comparison of the IMAE is made with the months of 2020 when production was most affected by the measures to contain the pandemic

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3 December 2022 - At The Banks - BCCR

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QCOSTARICA – Costa Rica’s economic activity registered in April 2021 a year-on-year growth of 8.8%, a figure affected by a “base” or “rebound” effect, since the comparison is made with the months of 2020 when production was most affected by measures to contain the pandemic.

The level of manufacturing production exceeds what was registered before the pandemic crisis

In the same period last year, the Índice Mensual de Actividad Económica (IMAE) – Monthly Index of Economic Activity – in its cycle trend series reported a drop of 8.6%. “The base effect is greater as of April, since 2020 was the first month that fully reflected the economic effects of the COVID-19 pandemic,” explained the Banco Central de Costa Rica (BCCR) – Central Bank – in its report on the behavior of the indicator.

Comparing the current production level with that experienced before the crisis, in an effort to isolate the “base” effect, could offer a clearer perspective. When comparing the record of the series adjusted by seasonality of April 2021 with that of February 2020, a variation of -2.3% is seen.

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“Therefore, although the economy recovers, it still does not reach the level observed before the pandemic,” says the BCCR document.

This gradual recovery process experienced a boost during the quarter to April, as the annualized quarterly variation rate of the seasonally adjusted series (SD) grew 8.9%. Which is more than the 7.1% experienced the previous month.

Most of the industries show growth in production compared to the same period of the previous year. The dynamism was especially notable in commerce and manufacturing.

The manufacturing industry experienced a year-on-year growth of 14.5% in April, thanks to a higher production of the free zone companies and also to the push of the companies of the definitive regime, mainly in “the production of sugar, rice, beverages, plastics, rubber, batteries, soaps and construction materials; production destined both for the domestic market and for exports,” according to the Central Bank.

The level of manufacturing production exceeds what was registered before the pandemic crisis. The growth in April 2021 is due both to a base effect, since in April 2020 production decreased as a result of the pandemic, and to the dynamics of this industry.

Commerce, on the other hand, had an increase of 22.7% due to the greater demand for construction materials and hardware, vehicles, fuels, and electrical and electronic equipment.

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Construction continues to suffer from contraction that began in December 2018, which has led to an accumulated fall of 17% in the level of activity in relation to the average of 2017. In April 2021 the fall was 4.2% compared to 2020, due to lesser public (-8.1%) and private (-3.0%) works.

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