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The economy is projected to continue expanding at a robust pace, owing to higher external demand and increasing public investment. Rising commodity and energy prices will help inflation rise towards the central bank’s target range.
Fiscal performance improved in 2016, thanks to better control of public spending and improved revenue collection. More expenditure containment and better revenue collection will be needed to reduce the budget deficit and stabilise the debt trajectory. To tame potential inflationary pressures, the central bank has withdrawn monetary policy accommodation.
Costa Rica has benefitted from globalisation through sustained inflows of direct investment and the creation of skilled jobs. However, people have been left behind and income inequality is high. Expanding early-childhood education and improving its quality would help women enter the labour market, raising their incomes. Stronger competition policy and reduced administrative burdens for new businesses would reduce barriers to entry, facilitate entrepreneurship, raise the economy’s ability to compete on world markets, and curb pervasive informality.
Economic Assessment of Costa Rica (survey page)