IMF Executive Board Concludes 2025 Article IV Consultation with Costa Rica
IMF News, May 13, 2025
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- Published: May 13, 2025
Key findings and near‑term outlook
- The Executive Board completed the Article IV Consultation for Costa Rica on May 12, 2025.
- Costa Rica has achieved remarkable economic progress due to its very strong fundamentals, policies, and policy frameworks.
- GDP growth has averaged above 5 percent per year since 2021.
- This year, growth is expected to moderate to around potential (3½ percent).
- Inflation is rising toward the Banco Central de Costa Rica’s (BCCR) target of 3 percent and is expected to return to the BCCR’s target in 2026.
- The current account deficit is expected to increase slightly to 1.8 percent of GDP in 2025.
- The primary surplus is expected to rise to 1¼ percent of GDP as fiscal consolidation continues.
- Risks to the growth outlook are tilted to the downside; risks to inflation are balanced.
Executive Board assessment and policy advice
- Directors commended: very strong implementation of macroeconomic policies, wide‑ranging reforms in the process of becoming an OECD member, successful completion of IMF‑supported programs, and strategic focus on exports and economic diversification.
- Fiscal policy:
- Directors welcomed the sustained decline of public debt and stressed that medium‑term fiscal consolidation is appropriately paced but will require spending to be kept below the ceiling permitted by the fiscal rule.
- Tax reforms should aim to increase equity, efficiency, and the revenue‑to‑GDP ratio.
- Full implementation of the public employment law by all public institutions is important and should not be delayed.
- The disputed claim by the social security system should be resolved comprehensively, including by clarifying the central government budget’s responsibility, coupled with improvements in the registries of beneficiaries and the system’s governance and accountability.
- Support for reforms to debt management to increase flexibility in issuing external debt.
- Monetary policy and exchange rate:
- Directors commended BCCR’s forward‑looking data‑dependent approach to monetary policy.
- There is scope to cut the policy rate if the convergence of inflation to the BCCR’s target weakens in the coming months.
- Passing legislation to further improve the BCCR’s governance, transparency, and accountability, and to institutionalize its de facto autonomy was underscored.
- The exchange rate should be allowed to flexibly adjust to market conditions, limiting foreign exchange intervention to addressing market volatility.
- Financial sector:
- Indicators of financial soundness remain comfortable, but the resolution of small non‑bank financial institutions last year highlights the need for a very strong supervisory and crisis management framework.
- Importance of passing the proposed amendments to the bank resolution and deposit insurance law.
- Call for close monitoring of risks related to the rise in FX lending.
- Structural and supply‑side policies:
- Efforts to advance supply‑side reforms were welcomed to sustain performance.
- Priorities include reducing skills mismatches, enhancing infrastructure quality, implementing legislation on public‑private partnerships, and better integrating climate considerations into public investment decisions to increase infrastructure resilience against natural disasters.
Selected economic indicators and projections (preserved exactly as presented)
- Output and Prices (Annual percentage change)
- Real GDP: 2022: 4.6; 2023: 5.1; 2024: 4.3; 2025: 3.4; 2026: 3.5; 2027: (not listed); 2028: (not listed)
- GDP deflator: 2022: 6.3; 2023: -0.1; 2024: 0.0; 2025: 3.0; 2026: 3.2
- Consumer prices (period average): 2022: 8.3; 2023: 0.5; 2024: -0.4; 2025: 2.2
- Savings and Investment (In percent of GDP, unless otherwise indicated)
- Gross domestic saving: 2022: 14.4; 2023: 13.8; 2024: 14.3; 2025: 13.5; 2026: 14.1
- Gross domestic investment: 2022: 17.7; 2023: 15.3; 2024: 15.7; 2025: 15.6; 2026: 15.4; 2027: 16.0
- External Sector
- Current account balance: 2022: -3.3; 2023: -1.4; 2024: -1.8; 2025: -1.9; 2026: -1.6; 2027: -1.5
- Trade balance: 2022: -6.7; 2023: -3.7; 2024: -2.6; 2025: -3.4; 2026: -4.0; 2027: -3.9
- Financial account balance: 2022: -0.7; 2023: -0.8
- Foreign direct investment, net: 2022: -4.4; 2023: -4.3; 2024: -4.5; 2025: -4.1
- Gross international reserves (millions of U.S. dollars): 2022: 8,724; 2023: 13,261; 2024: 14,181; 2025: 14,932; 2026: 15,792; 2027: 16,485; 2028: 17,301
- External debt: 2022: 50.7; 2023: 43.3; 2024: 42.0; 2025: 42.1; 2026: 44.0; 2027: 44.4
- Public Finances
- Central government primary balance: 2022: 2.1; 2023: 1.6; 2024: 1.1; 2025: 1.3; 2026: 1.5
- Central government overall balance: 2022: -2.8; 2023: -3.8; 2024: -3.2; 2025: -2.5; 2026: -2.3
- Central government debt: 2022: 63.0; 2023: 61.1; 2024: 59.8; 2025: 59.7; 2026: 59.0; 2027: 57.9; 2028: 56.7
- Money and Credit
- Credit to the private sector (percent change): 2022: 3.3; 2023: 1.9; 2024: 6.2; 2025: 6.4; 2026: 6.5; 2027: 6.6
- Monetary base 1: 2022: 8.0; 2023: 7.9; 2024: 8.2
- Broad money: 2022: 47.5; 2023: 47.4; 2024: 51.3; 2025: 50.5; 2026: 50.9; 2027: 51.5; 2028: 52.3
- Memorandum Items
- Nominal GDP (billions of colones): 2022: 44,810; 2023: 47,059; 2024: 49,116; 2025: 52,307; 2026: 55,830; 2027: 59,647; 2028: 63,720
- Output gap (as percent of potential GDP): 2022: -0.3; 2023: 1.0; 2024: 0.6; 2025: 0.4; 2026: 0.2; 2027: 0.1
- GDP per capita (US$): 2022: 13,240; 2023: 16,390; 2024: 17,909; 2025: 19,095; 2026: 20,036; 2027: 21,057; 2028: 22,138
- Unemployment rate: 2022: 11.7; 2023: 7.3; 2024: 6.9; 2025: 7.5; 2026: 8.5
Source: IMF Executive Board Concludes 2025 Article IV Consultation with Costa Rica (Press Release No. 25/142), May 13, 2025.