Press Release No. 09/404

Press Release: Statement by an IMF Mission to Costa Rica

November 12, 2009

A staff team from the International Monetary Fund (IMF) visited Costa Rica during November 2–11, 2009 to conduct the second review of the Stand-By Arrangement (SBA) approved in April 2009 (see Press Release No. 09/124). The mission met with Finance Minister Jenny Phillips, Central Bank Governor Francisco de Paula Gutiérrez, other senior officials, representatives of the financial sector, and economic advisors of the leading presidential candidates.

After the conclusion of the discussions, Mr. Andreas Bauer, the IMF mission chief for Costa Rica, made the following statement:

“The Costa Rican economy is showing clearer signs of recovery. Economic activity has been growing for several months on a seasonally adjusted basis, even though the expansion has not yet reached all sectors. Inflation has moderated to a historically low level, there have been no balance of payments pressures, and the financial sector remains stable. Overall, these developments are consistent with the staff’s projections at the time of the first program review in September.

“The outlook of a gradual recovery in a context of domestic and external stability is becoming firmer. The mission expects real GDP to grow by more than 2 percent in 2010, following a 1½ percent contraction in 2009. Annual inflation is on track to fall to 5 percent by end-2009, and remains within the central bank’s target band of 4–6 percent in 2010.

“Performance under the precautionary SBA with the Fund has continued to be very strong, as the authorities met all quantitative performance criteria for end September. Immediate risks to the program, including disruptive exchange rate movements, have declined further. Weak tax revenue performance remains the main risk to the program, as it could result in higher fiscal deficits and government financing requirements.

“The mission expects that the IMF Executive Board will consider the second review of the Stand-By Arrangement in mid-December. The authorities have indicated that they will continue to treat the Stand-By Arrangement as precautionary.”