C.R. 2009 Inflation Rate Hits All-Time Low

With only two months remaining in the year, Costa Rica’s inflation rate is on track to be the lowest annual rate ever recorded.

This is according to figures released this week by the National Statistics and Census Institute (INEC).

The inflation rate rose 0.23 percent in October, contributing to an accumulated 3.16 percent rise through the first 10 months of 2009. This represents the lowest recorded total for the first 10 months of any year since the Central Bank (BCCR) began tracking the figure in 1977.

And over the past 12 months, the accumulated inflation rate is at 4 percent, which is the lowest rate for a 12-month span since 1978. A year ago at this time, the 12-month accumulated inflation rate – from November 2007 to October 2008 – was 16.30 percent.

“It is not only important to look at the figure, but the context of what is going on in all the economy,” said Eric Vargas, strategy director at the consulting firm Aldesa.

“For example, if the economy were growing at a normal pace, the low inflation rate would be a very positive thing; it would indicate that we are keeping up with the increase in prices. However, in this situation, when the economy is in recession, the lowered inflation rate is an indication of the low level of economic activity. Though it seems the lowered inflation rate is a good result, it really means the economy isn’t

growing.”

Thus far in 2009, education, rent and living services have seen the biggest price increases. Education costs have spiked 10.95 percent, followed by rent and living expenses, which have increased 10.75 percent. Food and non-alcoholic drinks make up the only sector whose prices have seen significant decreases over the course of the year, falling 3.06 percent in the first 10 months of the year. The price of communications has fallen 0.09 percent thus far this year.

Looking at October by sector, entertainment and culture saw the highest increases in price, rising 0.50 percent. The price of food and non-alcoholic drinks rose 0.44 percent. The only price index that experienced a decrease was rent and living services, which dropped 0.51 percent.

Each month, INEC tracks the price variation of 292 products and services. The biggest price increases by specific item –from highest – were seen in milk, taxi transportation, corn, buses and tomatoes. The largest decreases in price were experienced in electricity service, motor vehicles, papaya, onion and washing machines.

–Adam Williams