Eurasia Group senior analyst Risa Grais-Targow cited growing challenges for President Luis Guillermo Solís’ ruling Citizen Action Party and a lack of perceived political will to rein in the country’s fiscal deficit among the drivers behind Friday's downgrade.
Overall, the CAFTA-DR agreement as brought Costa Rica economic success. However, with lagging unemployment and almost 20 percent of the country’s GDP generated from exports and investment with the United States, Costa Rica’s economic foundation could tumble quickly.
According to Costa Rica's former trade minister, Alberto Trejos, Cuba, whose halting reforms have failed to energize the island’s stagnant, centralized economy, may have a thing or two to learn from Costa Rica – which over the last 30 years has made strides in slashing poverty, promoting trade and luring foreign direct investment.
Last week, some 350 people attended an economic forum at Costa Rica’s Hotel Barceló San José Palacio hosted by the business magazine Summa. The forum, titled “Costa Rica: Where Are We Going?” featured panels of experts and insiders who examined issues such as the country’s economic growth, its fiscal deficit and setting the economy back on track. But they also focused on politics – and one particular party. (Hint, it wasn't Liberation.)
Other countries are outpacing Costa Rica when it comes to improving the ease of doing business, according to a press release from the World Bank. The World Bank's 2015 Doing Business report ranked Costa Rica 83rd out of 189 economies in the world for ease of doing business – down five spots from 2014 due in part to an adjustment of the annual study’s methodology.
Employees whose gross monthly income is less than ₡793,000 ($1,455) will be exempt from paying income tax, according to the latest update for the fiscal year 2015 approved by the Finance Ministry last week.
Costa Rica’s GDP growth for 2015 is forecast at 4.3 percent, up from 3.7 percent in 2014. While Costa Rica outperformed many of its Central American neighbors, Nicaragua and Panama are set to pull ahead in 2015 with 4.4 and 6.2 percent growth, respectively.
Expectations for companies to hire new workers in the last quarter of this year have dropped in all sectors and are at the lowest level in recent years, the consultant company Manpower reported on its Costa Rica Employment Outlook Survey 4Q released Tuesday.
Costa Rica has enjoyed a steady rise in the index during the last several years, jumping three spots this year, up from 54. The country scored especially well on metrics for health and education, technology readiness, and innovation potential.
One revenue stream the administration seems bully on is improving tax collection. During his 100-day speech, President Luis Guillermo Solís noted that tax evasion, estimated at 13.8 percent of GDP, outpaced actual tax collection during 2013, at 13.1 percent of GDP
