The government closed 2007 with the lowest fiscal deficit in two decades, according to preliminary projections from the Finance Ministry. The development owes itself mostly to a 27.4% jump in tax revenues.
The government’s newfound bounty also allowed for a significant increase in social spending, an important factor in the decrease in poverty marked last year (TT,Nov. 8, 2007).
Finance Minister Guillermo Zúñiga predicted the government would close the year with a deficit of about $84 million, or 0.4% of the country’s gross domestic product.
“With these data, it strengthens the possibility of closing the year with a much lower fiscal deficit,” Zúñiga said according to the Associated Press.
“It could be that we break even or that we come out with a surplus,” he said.
The Finance Ministry saw a sharp increase in tax collection in 2007 thanks to a variety of new programs. Income tax collection was up 36.9% to ¢408.7 billion ($825.8 million) as of November.
Similarly, customs revenues (a bundle of various special taxes) were up 29.6% to ¢709.2 billion ($1.43 billion), a number that represents 40% of the government’s total income.
Through November, the government collected a total of ¢1.77 trillion ($3.6 billion).
During the same period in 2006, tax collection increased by 24.6% compared to the year before. At the same time, Zúñiga pointed out, government spending grew by about 9% – essentially negative growth, considering inflation was more than 10%.
The decrease in the deficit puts the government in a stronger position to deal with issues like inflation and restructuring its debt, which is about $9.6 billion.
It also gives the Finance Ministry the green light to propose spending increases on social programs, the Public Safety Ministry, the Public Works Ministry and the Institute for Municipal Development.
The International Monetary Fund has estimated Costa Rica’s GDP will grow by 5% in 2008.