No menu items!

COSTA RICA'S LEADING ENGLISH LANGUAGE NEWSPAPER

HomeArchiveOil Prices Could Derail Country’s Monetary Policy

Oil Prices Could Derail Country’s Monetary Policy

HIGH international oil prices could make it difficult for the Central Bank to meet the macroeconomic targets it set in its 2004 monetary policy, according to General Manager José Rafael Brenes.

Brenes said the current price of crude oil is 25% higher than expected when this year’s monetary policy was announced, the daily La Nación reported.

On Jan. 14, the Central Bank unveiled its annual monetary policy, which predicted economic stability with 4.4% growth and 9% inflation (TT, Jan. 16). The bank’s calculations were based on the assumption that the average price of a barrel of oil in 2004 would be $28.

However, in recent weeks it has hovered between $32 and $35.

Central Bank President Francisco de Paula Gutiérrez said the bank would wait to see how the price of crude evolves before revising its goals.

If the high prices continue, it would likely result in higher inflation, Brenes said. During the last five months, the country has registered a monthly inflation higher than 1%.

Experts worry that in addition to higher inflation, high oil prices could increase the country’s current account deficit – the overall balance between imports of goods and services (not capital).

This year, the Central Bank was expecting the country’s current account deficit to be equal to 4.4% of the country’s gross domestic product (GDP).

However, higher oil prices will increase the price of total imports and the total size of the deficit. For example, Brenes said, if oil prices remain $5 above the Central Bank’s estimate, the deficit would increase by approximately $80 million.

To counter the deficit and prevent the Central Bank from depleting its foreign currency reserves, it would be necessary to increase the colón’s rate of devaluation against the dollar or sell bonds on the open market, according to Brenes.

 

Trending Now

Costa Rica Approves Extradition of Ex-Minister Gamboa and Associates

A Costa Rican court has approved the extradition of former Security Minister Celso Gamboa Sánchez to the United States on charges of international cocaine...

Costa Rica Updates National ID Card with Enhanced Security Features

Costa Rica's Supreme Electoral Tribunal (TSE) rolled out a redesigned physical identity card today. The update focuses on better protection against fraud while keeping...

Costa Rica Landslide Tragedy as Family Buried Alive

Heavy rains triggered a deadly landslide in Piedades Sur, San Ramón, Alajuela, late Saturday night, burying a family home and killing two adults and...

Costa Rica Traffic Accidents Drive Up Insurance Premiums

Costa Rica's roads have turned into a deadly trap, with traffic accidents claiming more lives and causing more injuries than ever before. On Friday,...

Juanes Lands in Costa Rica to Shoot Videos for New Tracks

Colombian singer Juanes has arrived in Costa Rica, turning our country's landscapes into backdrops for his latest music videos. The artist, known for hits...

Costa Rica Weather Alert: Heavy Rain, Flooding, and Landslides

The National Meteorological Institute (IMN) issued a warning on Thursday about persistent heavy rains and thunderstorms affecting much of Costa Rica.These conditions are the...
Avatar
spot_img
Costa Rica Coffee Maker Chorreador
Costa Rica Coffee Maker Chorreador
Costa Rica Travel Insurance
Costa Rica Rocking Chait
Costa Rica Travel

Latest News from Costa Rica