OECD Economic Surveys: Costa Rica 2020
Costa Rica’s social and economic progress has been remarkable. Over the last 30 years, growth has been steady and GDP per capita has tripled. A strong commitment towards trade openness has been key to attract foreign direct investment and move Costa Rica up in the global value chain. Costa Rica faces substantial challenges to retain achieved successes and to continue converging towards higher living standards. The fiscal situation remains a critical vulnerability. Large deficits and rapidly rising public debt threaten Costa Rica’s achievements. The fiscal reform approved in December 2018 was a historic step to restore fiscal sustainability. Boosting growth is also a key priority, as the gap in GDP per capita with advanced economies remains large and unemployment is high. Inequality and informality remain also high. The COVID-19 pandemic has significantly impacted Costa Rica, with the global economic slowdown and the necessary containment measures hampering growth prospects and fiscal accounts. Responding successfully to these substantial challenges will hinge on buttressing the fiscal framework and implementing reforms to foster inclusive growth. Further advances on living standards will hinge on raising productivity by setting the right conditions for domestic companies to thrive and maintaining and reinforcing the commitment to foreign direct investment and trade. Maintaining the commitment to preserving natural resources and biodiversity and with the decarbonisation plan will pay off in terms of growth and jobs.
SPECIAL FEATURES: REGULATIONS; FINANCIAL INCLUSION
Boosting access to credit and ensuring financial inclusion for all
Having access to credit is essential for households to address the volatility of their personal finances over time and for firms to fund their investments. Accessing financial services at affordable cost on the other hand, is crucial to ensure financial security of all economic units. Despite recent improvements, there are still large financial inclusion disparities in Costa Rica, notably across regions, by gender, and size of firms. This chapter discusses policy reforms that would reduce these disparities. Some of the key policy priorities are to improve transparency by strengthening the credit registry and allocating the development banking credit more effectively. Enhancing financial literacy could help avoid excessive consumer indebtedness. Technological innovation would also help Costa Rica: granting FinTech start-ups direct and full access to the state-of-the-art electronic payments system would increase competition, reduce transactions costs and ensure financial inclusion for all.
Also available in: Spanish
- Click to access:
-
Click to download PDF - 1,023.57KBPDF