Economic transformation in Costa Rica

In the early 2020s, Costa Rica faced unexpected fiscal challenges, with inflation rising to 7.8% in 2022. This upward pressure on consumer prices squeezed the real purchasing power of Costa Rican households, leading to a temporary slowdown in private consumption. Concurrently, the rising domestic price level threatened the international competitiveness of its organic agricultural exports, causing a brief contraction in net foreign demand.

By 2024, inflation had moderated to a stable 2.5%, reassuring domestic markets. To drive long-term sustainable development, the Costa Rican government launched a major funding initiative directed at national grid electrification, public schools, and regional clinics. Additionally, the Central American Bank for Economic Integration (CABEI) provided development loans to upgrade urban transit networks. Fig. 1 shows the CABEI assistance per capita and the GDP per capita for six Central American nations in 2023 as index figures.

Fig. 1: Index of CABEI Assistance per capita and GDP per capita 2023

This public funding expansion has crowded in private capital, stimulating substantial domestic business investment in green technologies, although debate continues regarding its ultimate impact on the public debt-to-GDP ratio and the country's overall trade balance.