IMF Staff Concludes Virtual Visit to Costa Rica to Discuss Progress of Economic Reforms Under the Extended Fund Facility
IMF News, October 7, 2021
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Bibliographic details
- Published: October 7, 2021
Mission summary
- Press Release No. 21/288; mission led by Ms. Manuela Goretti.
- Virtual meetings held during September 22 - October 6.
- End-of-Mission press release conveying preliminary findings; views are those of IMF staff and do not necessarily represent the views of the IMF’s Executive Board.
- Mission will not result in a Board discussion.
- “The mission made significant progress toward a staff-level agreement for the first review of the EFF-supported program. Discussions will continue in following weeks, including during the Annual Meetings of the IMF and World Bank.”
- Discussions will continue in coming weeks.
Economic outlook and projections
- Real GDP is now projected to grow by 4.7 percent in 2021, compared to 2.6 percent at the time of the EFF request.
- Strong export growth and a vigorous vaccination campaign are cited as supporting a robust economic recovery.
- All of the end-July program targets were comfortably met.
Fiscal policy, debt sustainability, and revenue measures
- Authorities are on track to meet their fiscal goals under the program.
- Fiscal strategy relies on a balanced mix of expenditure rationalization—in line with the fiscal rule—and equitable revenue mobilization.
- Priority was given to supporting the most vulnerable and the response to the pandemic.
- “The additional revenue measures under discussion in the Legislative Assembly are essential to keeping the authorities’ program on track to achieve a primary surplus target of 1 percent of GDP by 2023 and ensure public debt-GDP is firmly put on a downward path.”
- Legislative approval of the ambitious Public Employment Bill will be critical to strengthen the equity and efficiency of government spending.
Monetary policy and financial sector oversight
- “Monetary policy has been data-dependent and forward-looking, ensuring low and stable inflation.”
- The Central Bank of Costa Rica’s (BCCR) expansionary stance remains appropriate, given the still-subdued inflation outlook.
- “Further monetary support to the economy could be warranted in the coming months.”
- Continued exchange rate flexibility and fostering the development of the foreign exchange market will help facilitate effective risk management.
- Mission welcomed ongoing steps to further enhance the BCCR’s operational autonomy and governance.
- Mission welcomed proactive supervisory efforts to strengthen financial oversight and the gradual unwinding of emergency regulatory measures introduced to counter the impact of COVID.
Structural reforms, inclusiveness, and climate transition
- Costa Rica is advancing an ambitious structural reform agenda to foster strong and inclusive growth in the transition to a low carbon economy.
- As part of its macro-structural reform agenda, Costa Rica is pressing ahead with efforts to mitigate the disproportionate impact of the pandemic on the most vulnerable by promoting greater formalization and supporting female labor force participation.
- “Costa Rica’s ambitious policy plans to transition to a low-carbon economy, generating new economic and job opportunities, are particularly commendable.”
Meetings, stakeholders, and acknowledgements
- The mission held virtual meetings with:
- President Alvarado
- BCCR’s President Cubero
- Minister of Finance Villegas
- Minister of Planning Garrido
- Other senior government and financial sector officials, members of the Legislative Assembly, academics, private sector, civil society, and union representatives
- Other development partners
- “The IMF team is grateful to the Costa Rican authorities and other interlocutors for the candid and constructive discussions.”
IMF Communications Department, October 7, 2021 — IMF Staff Concludes Virtual Visit to Costa Rica to Discuss Progress of Economic Reforms Under the Extended Fund Facility