The monthly Economic Activity Index (IMAE) report for the month of March, released this week by the Central Bank (BCCR), showed a slowdown in production for the fifth month in a row. The report indicated a 5.1 percent contraction in economic activity during February compared to the same month last year.
The manufacturing industry continues to be the most affected sector in the nation, registering a 17.3 percent contraction in productivity since November 2008. The sector has been shrinking for the last 15 months, according to a report the economic consulting firm Aldesa released on Monday.
“The international financial downturn has impacted sectors pertaining to foreign trade,” the Aldesa report stated. “At the same time, the hike in interest rates, (current) credit restrictions and lowered sales expectations by companies are some of the elements that have debilitated the economy.”
The BCCR reported that the hotel sector has contracted for the 12th month in a row, showing an 8.7 percent drop in February from the same month last year.
During 2008, the hotel and commercial sectors both experienced a phase of dynamic growth in the beginning of the year, while during the third quarter of last year they faced a strong deceleration. Finally, during the last quarter of 2008 both sectors demonstrated a significant contraction.
The hotel industry’s poor performance is closely tied to the drop in arrivals of international tourists into the country, the BCCR monthly report stated.
In an effort to reactivate one of Costa Rica’s most essential sectors, the Costa Rican Tourism Board (ICT) launched a $346,000 campaign this week to promote domestic tourism among Costa Ricans and residents (See separate story, Page 11).
Commercial activities reported a 3.5 contraction rate during February, the sector’s ninth consecutive month of negative growth.
A slump in sales of vehicles, construction materials, electrical equipment and home appliances and some food items explained much of the contraction in commerce, the March IMAE indicated.
As a precautionary measure, the government officially requested a provisional loan in the amount of $735 million from the International Monetary Fund (IMF). The IMF said this fund, if needed, would assist Costa Rica in bolstering economic activity as well as preserving social supports.
The BCCR said on Monday that in the case the fund is utilized, financial conditions attached to the fund are favorable, including an annual interest rate of 1.5 percent, a two-year grace period on the payment of interest. The country would have five years to pay back complete amount.
On Tuesday, President Oscar Arias and his finance minister, Guillermo Zúñiga, met with representatives from the private banking sector to analyze additional ways to confront the current economic crisis. Communications Minister Mayí Antillón said the representatives of the Costa Rican Bank Association wanted to discuss measures regarding regulation of private banks, how these banks can activate more credit for small producers and other issues.
Arias and representatives from the Finance Ministry also met with the heads of the different state banks on Thursday morning to further discuss means to deal with the current economic crisis. On the agenda for the meeting was a discussion of challenges confronting the nation’s most vital sectors, such as agriculture and tourism.
Tico Times reporter Chrissie Long contributed to this report.