Battered Economy Poised for Rebound
As far as the Costa Rican economy is concerned, 2009 can be characterized in a single word: crisis.
The huge slide in the United States economy at the tail end of 2008 put the world economy in difficult shape at the beginning of 2009. And only in the final couple of months of this year have economists begun to see signs of a recovery.
The Costa Rican economy was not immune to the worldwide recession, and the proof is in the numbers. Unemployment rose this year to 7.8 percent, up from 4.9 percent in 2008. The almost 8 percent
unemployment rate is the highest recorded since 1984.
The tourism and export markets also were jarred by the economic crisis. As finances tightened, tourism in Costa Rica took a tumble after the banner year of 2008 when more than two million tourists visited the country. Overall, tourism figures for 2009 are expected to reveal a 10 to15 percent decrease from the previous year (see separate story).
Export goods this year experienced a similar decrease in demand. After revenues in the export market hit an all-time high of more than $9.5 billion in 2008, the demand for Costa Rican products cooled in 2009, falling more than 11 percent through November, according to Costa Rica’s Foreign Trade Promotion Office (PROCOMER).
The country’s record-low inflation rate for 2009 was also an indicator of the downturn in the economy this year. Through November, the rate of consumer price inflation reached 3 percent, the lowest recorded figure since 1972. Even with low prices, consumer expenditures decreased, and money being pumped into the economy dropped considerably since 2008, when the country registered an inflation rate of 13.9 percent.
Given all of these crisis conditions, it is no surprise that the country’s gross domestic product (GDP) fell almost 5 percent in 2009. But not all the news is negative.
Markets are cyclical and, in economic history, great falls generally are followed by slow recoveries.
Toward the end of the year, the idea that Costa Rica has entered into a phase of gradual recovery has been on the lips of many Tico economists. There is growing confidence that the worst of the crisis appears to be in the country’s rearview mirror and that better days are on the horizon, however distant that might be.
“Without question, 2009 was one of the most difficult years we’ve ever had to deal with in the Costa Rican economy,” said Francisco de Paula Gutiérrez, president of the Central Bank of Costa Rica (BCCR) at a year-end presentation this month.
“The positive aspect is that in the last few months things have started to stabilize and show the first signs of recovery. We think that the growth at the end of the year represents that 2010 will bring stronger economic results.”
Members of the export, tourism, banking and real estate sectors have echoed this sentiment. The year has been challenging and difficult, but the final months showed minor improvements.
“When you compare Costa Rica to other countries, it has done much better this year than most,” said Alfredo Ortuño, director of the Central American Bank of Economic Integration (BCIE). “The unemployment rate is lower than in most other countries, there are many infrastructure projects going on to improve the country and the exchange rate of the colón to the dollar has been reasonably stable. … Costa Rica is in good shape to recover from the crisis year.”
Possibly the best news of the 2009 economic year is that the country has weathered the crisis. At the end of 12 rocky months, the Costa Rican economy is battered and bruised, but still standing and poised for a rebound.
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