Costa Rica’s economic growth since the pandemic has been strong, with an improved fiscal outlook thanks to a commitment to fiscal discipline. To sustain this momentum and support solid medium-term growth, enhance living standards and secure fiscal sustainability, policy action should focus on continuing and deepening reform efforts, according to a new OECD report.
The latest OECD Economic Survey of Costa Rica says that real GDP is projected to rise by 3.8% in 2025 and 2026, while inflation will gradually increase to an average of 2.4% this year and 3.2% next year. Growth will be driven by exports and private consumption, supported by formal job creation and low inflation.
The public-debt-to-GDP ratio is declining but ensuring fiscal sustainability remains a priority. Costa Rica should focus on reducing public debt by sticking to the fiscal rule, introducing spending reviews to improve public spending efficiency and optimising tax revenues by expanding tax bases.
Costa Rica’s commitment to open trade has boosted exports, diversified production and driven economic growth. Medical devices and business services have now surpassed agricultural commodities and tourism as the country’s top exports. Global efforts to diversify supply chains are an opportunity for Costa Rica to further capitalise on its strong commitment to open trade and to tackle the longstanding challenge of enabling more workers, firms and regions to benefit from trade and investment.
Costa Rica’s well-educated workforce has helped attract foreign direct investment, but rising skills shortages now threaten its attractiveness and ability to maximize trade benefits. Urgent priorities include accelerating vocational education reforms to boost technical skills, increasing technicians and graduates in science, technology, engineering and mathematics (STEM) subjects and ensuring that university education is better aligned with labour market needs.
“Costa Rica should address skill mismatches, increase female labour participation, and reduce informality to boost medium-term growth,” OECD Secretary-General Mathias Cormann said, presenting the Survey in San José alongside President Rodrigo Chaves and Minister of Foreign Trade Manuel Tovar. “Expanding access to high-quality affordable early childhood education and care should be a priority. Lowering the cost of formal employment and reducing the administrative and economic burdens associated with establishing formal business would also help reduce informality.”
Infrastructure bottlenecks are large, driving up trade costs and limiting the participation of remote regions and SMEs in international trade. Key issues include poor-quality roads and overcrowded ports. Strengthening feasibility assessments for transport projects, and establishing detailed implementation plans with clear timelines and milestones, would help close infrastructure gaps within a fiscally constrained environment.
Costa Rica has set ambitious targets to decarbonize its economy. Nearly all of Costa Rica’s electricity is generated from renewable sources, with hydropower accounting for around 70%. Climate change is reducing rainfall, challenging hydroelectric generation. At the same time, the planned electrification of transport and rising foreign direct investment are set to drive a substantial increase in electricity demand. Costa Rica has significant untapped potential in wind, solar, and geothermal energy, which could support this growing demand by diversifying and expanding renewable energy production. Unlocking this potential will require increased investment and regulatory reforms in the electricity sector.
See an Overview of the Economic Survey of Costa Rica with key findings and charts (this link can be used in media articles).
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