OECD Economic Outlook, Volume 2025 Issue 2

Costa Rica

GDP growth is projected to remain broadly stable, easing from 4.2% in 2025 to 3.5% in 2026 and 3.4% in 2027. The contribution of external demand is expected to gradually weaken due to increased tariffs on Costa Rican exports to the United States, the country’s main trading partner. Private consumption is set to remain resilient, supported by moderate gains in disposable income. After turning negative in May 2025, inflation is expected to rise very gradually toward the 3% target, reaching 0.8% in 2026 and 2.1% in 2027.

The fiscal situation has improved but ensuring fiscal sustainability requires maintaining strict adherence to the fiscal rule to contain public spending, introducing spending reviews to improve public spending efficiency and raising more tax revenues by expanding tax bases. Continuing to expand export opportunities via trade agreements that open new markets would help diversify Costa Rica’s concentrated export markets.

Growth remains solid

GDP growth averaged 4.4% in the first three quarters of 2025, in line with 4.3% in 2024. Household consumption remained solid, supported by robust credit consumption growth and a sharp increase in real wages, although employment creation was stagnant. Investment momentum has weakened, with a drop in FDI inflows in the first half of 2025. Economic activity remains robust, with the Monthly Index of Economic Activity increasing by 4.4% over the year to September 2025, driven primarily by exports manufactured under the special regime. Traditional sectors saw more moderate growth, despite a contraction in agriculture. Headline inflation dropped to -0.4% (year-on-year) in October 2025. Core inflation remained positive but subdued.

Costa Rica

1. The horizontal dashed black line indicates the target inflation rate of monetary policy, and the shaded area the tolerance band around the target (2-4%). Headline and core indicate, respectively, the headline consumer price inflation rate and the core consumer price inflation rate. The core consumer price inflation rate measures consumer price inflation excluding food and energy components.

Source: Banco Central de Costa Rica.

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Costa Rica: Demand, output and prices

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In July 2025, the tariff applied to Costa Rica’s goods exports to the United States rose to 15%. The United States accounts for around 16.2% of total exports and 47% of goods exports. Tourism and business services, which are Costa Rica main service exports, and semiconductors, a sizable part of Costa Rican exports to the United States, are currently not subject to tariffs.

Monetary policy will ease while fiscal consolidation continues

The Central Bank reduced the monetary policy rate to 3.5% through two 25 basis point cuts in July and September 2025. A further quarter-point reduction is projected in the first half of 2026, after which the rate is expected to remain stable as inflation slowly increases toward the 3% target. The central government is projected to maintain a primary surplus of 1.3% of GDP in both 2026 and 2027, supported by expenditure growth control under the fiscal rule. The central government budget deficit is projected to reach 3.3% of GDP in 2026 and 3.1% in 2027, reflecting large public debt servicing costs estimated at around 4.6% of GDP in 2026 and 4.3% in 2027. Central government debt is expected to continue its gradual decline, reaching 59.5% of GDP by the end of 2026.

Growth will be held back by global uncertainty and trade tensions

GDP growth is projected at 3.5% in 2026 and 3.4% in 2027, held back by weaker net exports and investment following increased global uncertainty and the US tariff increase. Economic and trade policy uncertainty will reduce foreign direct investment inflows, while public investment will remain constrained by limited fiscal space. Real wage growth will support private consumption, though its impact will be partially offset by weak employment creation. Risks to the outlook are tilted to the downside. A pending US investigation could lead, by spring 2026, to increased tariffs on US imports of medical devices, a key exporting sector for Costa Rica that is heavily reliant on demand from the United States. Costa Rica’s high level of dollarisation exposes the country to external funding and exchange rate vulnerabilities. On the upside, renewed efforts to deepen trade integration and diversify export markets might strengthen net exports.

Structural reforms remain a priority to ensure sustainable growth

Continuing efforts to open new markets for exports via trade agreements would help export diversification. Improving port infrastructure and increasing capacity on the Pacific coast would support trade growth, facilitate expansion of exports towards Asia and help diversify trade. Reorientating vocational training towards highly demanded skills (digital and technical) and increasing the number of STEM graduates would support investment, create better jobs and enhance growth. Eliminating regulatory restrictions and caps on private sector participation in electricity generation and retail supply and removing barriers to foreign investment in the electricity sector would help attract investment required for meeting the increasing demand for electricity.