Q COSTARICA — Although negative inflation can be interpreted as temporary relief for households, its persistence can become an obstacle to economic growth, according to Elizabeth Morales, deputy manager of Coopecaja.
In other words, prolonged negative inflation rates, like those Costa Rica is experiencing, are not good for the country’s economy or for households.
“Persistent negative inflation (deflation), like what we are seeing, is considered dangerous for long-term economic health. While the short-term benefit is increased purchasing power for households, prolonged deflation erodes credit dynamism and investment, which are essential drivers for the country’s sustainable growth. The risk is not of internal stagflation, but rather of contagion from a slowdown due to the threat of stagflation in key trading partners,” the specialist told La República.
Persistently negative inflation can discourage consumption and investment, as households and businesses postpone their decisions while waiting for lower prices.
In addition, a deflationary environment tends to decrease the expected profitability of productive projects, affecting credit availability and overall economic flow.
What’s happening?
Costa Rica has experienced deflation (falling prices) for several months in 2025, with significant negative annual rates in months such as August, September, and October, driven by decreases in transportation, communications, and food, although services such as education and housing are rising, indicating a mixed economy with downward pressures on certain goods and services
Costa Rica has been below the Central Bank’s target of 3% for 30 consecutive months. The last time this level was reached was in April 2023, and projections indicate that it will not be met again until 2027.
Inflation registered a slight increase in October, reaching -0.38%, after the -1% observed in the previous month, according to the National Institute of Statistics and Census (INEC).
Prices for many goods have dropped mainly because transportation costs like fuel and flights have fallen, technology products such as phones have gotten cheaper, and some foods like tomatoes are less expensive. On the other hand, things like education, housing, healthcare, and recreation have become more costly.
Inflation is projected to climb back into positive territory by the end of 2025, with estimates around 0.2% for November and 0.5% by the close of the current quarter, based on Trading Economics models.
However, despite the upward movement, the indicator remains in negative territory and has now been below zero for six consecutive months this year.
Detailed data on the Consumer Price Index (CPI) can be found on the official websites of the Central Bank of Costa Rica and the National Institute of Statistics and Census (INEC).