This Survey is published on the responsibility of the Economic and Development Review Committee of the OECD, which is charged with the examination of the economic situation of member countries.

Source: Calculations based on data extracted from databases of the following organisations: OECD, International Energy Agency, International Labour Organisation, International Monetary Fund, United Nations, World Bank.

Costa Rica has made remarkable economic progress, but faces substantial challenges to safeguard its achievements and further improve living standards. Life expectancy is at par with the OECD average and political stability has been sustained thanks to solid institutions. Unemployment () and informality, affecting nearly half of the labour force, are high. Growth prospects were deteriorating before the pandemic and going forward population ageing will take an additional toll.

Costa Rica recovered well from the pandemic-induced recession. Sustained and resilient export performance continues to support growth, while consumption is hindered by high inflation and unemployment. The fiscal situation improved but remains challenging, requiring sustained efforts to contain spending and boost public sector efficiency for several years. Maintaining and reinforcing the commitment to foreign direct investment and trade, which has been key to diversify the export basket, and improving the conditions for domestic companies to thrive are key challenges to boost living standards and formal job creation. This would require reducing the regulatory burden, improving the tax mix, fostering more competition in key markets and continuing decarbonisation and environment protection efforts. Supporting higher female labour participation and upgrading social protection will help to adapt to ongoing demographic changes and improve the equality of opportunities.

Education and training are a high priority for Costa Rica that devotes to them more than 6.5% of GDP, one of the highest spending shares among OECD countries. However, educational outcomes remain poor and firms struggle to fill their vacancies, particularly in technical and scientific positions, which may endanger Costa Rica’s capacity to keep attracting foreign direct investment. Its complex fiscal situation requires Costa Rica to improve efficiency and quality of public spending in education to better support growth and equity. There is a fundamental need to improve the quality of early and general basic education to avoid that too many Costa Ricans leave education too early and without the skills needed to find a formal job. This requires a more targeted support to students with learning gaps, improving teachers’ selection and training and expanding access to early education. Revisiting the university funding mechanism will improve its accountability and can help increase the number of graduates in scientific areas. Reforms in vocational education may increase the supply of high-quality technicians, which will reduce existing skills mismatches and help more Costa Ricans access better-paid formal jobs.