Countries & Regions

Among Central American countries, Costa Rica showed the largest GDP after Guatemala, and ended 2009 with 29,303 million USD (see Table 1). However, according to the “Regional Economic Report 2009” from the Executive Secretariat of the Central American Monetary Council (SECMCA) production activity was strongly impacted by adverse effects of the international financial crisis, showing a real decrease of 1.3%. The actions of the Government’s initiative to capitalize with 117.5 million USD to three state-owned banks, in order to maintain and increase credit levels to the production sector. In the end, the most affected activities were construction (-5%), trade, restaurants and hotels (-4.5%), which were tourism-related, one of the currency generating mainstays of the country; other activities such as the manufacturing industry, agriculture, forestry and fishing showed setbacks of approximately 3%.

The report also showed a sharp decline in exports of goods as of the closing of 2009, showing a 7.6% drop which is attributed to the worldwide economic recession, mainly in the United States, Costa Rica’s main social commercial partner. Likewise, imports decreased at a faster rate than exports (25.9%), which was related to the drop of domestic product, the lower consumption of oil and its derivatives, as well as to the decrease in the purchase of basic raw materials. As a result of the drop of internal and external demand, inter annual inflation in Costa Rica, measured with the variation of general IPC, was 4.0% in December 2009, the lowest in the last 39 years but the highest of the countries in Central America.

In the financial and credit activity sector, some deterioration was observed in lending to the private sector, showing negative annual flows in March, June and November, and ending with a positive variation of 5.6% in December 2009 (still low if compared to the 30.8% growth as of Dec. 2008). Contraction in the credit to the private sector was related to a more cautious position and the aversion to risk of financial entities and the lower demand of credits by companies and families. Similar to the trend shown in the rest of Central America, public sector credit was the one with more dynamism, and grew 37.5% in 2009, in contrast to the 19.4% decrease shown the previous year. Active nominal interest rates remained high while passive rates started to decrease in the last four-month period of 2009, giving rise to a 2.7% increase in the spread of rates of domestic currency.