No menu items!

COSTA RICA'S LEADING ENGLISH LANGUAGE NEWSPAPER

HomeNewsCosta RicaDeficit leads Moody's to downgrade Costa Rica's credit rating

Deficit leads Moody’s to downgrade Costa Rica’s credit rating

Moody’s Investor Services, a United States-based financial company, downgraded the Government of Costa Rica’s long-term bond credit ratings to B2 from B1, it announced this week in a press release.

The move, which coincided with a rating outlook change to stable from negative, is due to the following factors, according to the company:

High fiscal deficits leading to an upward trend in debt metrics

Moody’s says that, while the fiscal reform passed in 2018 will help reduce Costa Rica’s fiscal deficit, “this will happen only gradually.”

In 2019, Costa Rica’s fiscal deficit reached 6.96% of GDP, the highest figure of the last three decades, according to the Ministry of Finance. In response, the government announced further fiscal consolidation plans with a focus on containing public spending, replacing high-interest loans, and reducing tax evasion.

Moody’s expects Costa Rica’s “adverse fiscal trends to continue” as these measures are implemented, and financial analyst Nathalie Marshik said the country has “absolutely no room for error in 2020,” according to Bloomberg.

“The 2019 fiscal results highlight the difficulties Costa Rica faces in its fiscal consolidation efforts,” the Moody’s report said. “Despite an 8% increase in overall revenues last year, the government deficit was more than 1% of GDP wider than the authorities’ original target, driven by increased interest costs and higher capital spending.”

Recurring funding challenges resulting from relatively large borrowing requirements

Moody’s notes that the fiscal deficit and debt repayment increases the Costa Rican government’s funding needs, which will “pose recurrent financing challenges.”

“Costa Rica’s international borrowing rates remain among the highest in the region, exposing the government to changes in market appetite for its debt,” the report said.

Moody’s says that while a rating upgrade is “unlikely,” Costa Rica can improve its financial standing by implementing “structural budgetary adjustments that materially reduce fiscal deficits, limiting the expected worsening in government debt indicators and, as a result, easing funding risks.”

 

Trending Now

Costa Rica’s Ojochal: From Farms to Luxury Tourism Hub

Ojochal, a small town in between the Pacific Ocean and the Fila Costeña in Costa Rica’s Osa, isn’t the sleepy agricultural community it once...

Costa Rica Tourism Slips Again in May 2025: U.S. and European Visitors Drop

Tourist arrivals to Costa Rica took another hit in May 2025, raising red flags for the country’s vital tourism industry. Data from the Costa...

U.S. Revokes Visa of Ex-Panama President Torrijos After Military Deal Criticism

The U.S. government under Donald Trump canceled the visa of former Panamanian President Martín Torrijos after he criticized a new agreement allowing U.S. military...

Costa Rica Faces Slower Growth and Rising Exchange Rate Pressures

Costa Rica is bracing for a challenging economic landscape through 2025 and into 2026, marked by slower growth, exchange rate pressures, and mounting uncertainties,...

Costa Rica’s Tortuga Island Hits Coral Milestone in Marine Restoration Push

Costa Rica’s Tortuga Island is making waves in marine conservation. On World Oceans Day the National Learning Institute (INA), State Distance University (UNED), and...

Costa Rica’s Massive Drug Raid Targets Cocaine Network to Europe

Costa Rican authorities struck a major blow against international drug trafficking dismantling a criminal network that smuggled over five tons of cocaine to Europe....
spot_img
Costa Rica Tours
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