Deficit

The country intends to contain the fiscal shortfall through a series of spending cuts and new income

Costa Rica closed 2020 with a fiscal deficit of 8.3% of GDP, the highest in recent decades although lower than the official projection, the government announced Monday.

The Costa Rican government predicts a fiscal deficit of up to 9.7% of GDP as a result of falling revenues and expenses related to the COVID-19 pandemic.

The Costa Rican government announced a plan that aims to consolidate finances and encourage economic growth without applying further taxes. 

The figure was given despite the fact that the country adopted a tax reform at the end of 2018 that included tax increases to address the deficit.

President Solís highlighted the healthy economy in his State of the Nation speech but offered no hints as to how his administration might change tack to achieve its specific goals, including fiscal reform.

Former two-term President Óscar Arias: “In this dysfunctional democracy that we have, it is difficult to achieve what you propose.”

The ratings agency Moody Investors Services downgraded Costa Rica’s government bond rating to Ba1 from Baa3 with a stable outlook Tuesday. The decision came weeks after President Luis Guillermo Solís presented his government’s budget for 2015 without any substantial proposals to curb the country’s growing deficit.

Business confidence in Costa Rica dropped by 10 percent compared to the same period last year, a survey by the Union of Private-Sector Chambers and Associations said. Confidence dropped in every sector surveyed.

Finance Minister Edgar Ayales announced Wednesday that Costa Rica’s deficit reached 5.4 percent of gross domestic product at the end of 2013, 1 percent higher than during 2012.