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Growth is projected to remain solid, supported by strong exports and inflows of foreign direct investment. Domestic investment is set to rebound, driven by public infrastructure projects. Despite robust output growth, unemployment will remain high, reflecting persistent skill mismatches. Inflation will increase, but is projected to stay below 3%.
Restoring sustainable public finances has become more urgent. The continuation of the current piecemeal fiscal consolidation measures will result in a modest improvement in the primary balance but will fail to halt the deteriorating public debt trajectory. This will put upward pressure on interest rates and hurt private investment and growth prospects. As public debt grows, so does the risk that the government becomes unable to meet its financing needs through debt issuances, which would force damaging cuts to the welfare system and threaten macroeconomic stability. Structural reforms to reduce informality, improve education, address infrastructure gaps and strengthen competition would boost productivity and inclusive growth.
Economic Assessment of Costa Rica (survey page)