Costa Rica » Introduction

Basic Economic Facts

Inflation rose to 22.5% in 1995, dropped to 11.2% in 1997, 12% in 1998, and 11% in 1999. Large government deficits--fueled by interest payments on the massive internal debt--and inefficient administration by government monopolies have undermined efforts to maintain the quality of social services. Curbing inflation, reducing the deficit, and improving public sector efficiency remain key challenges to the government. Political resistance to privatization has stalled liberalization efforts.

The strength in the nontraditional export and tourism sector is masking a relatively lackluster performance by traditional sectors, including agriculture. Inflation, as measured by the Consumer Price Index, was 10.1% in 1999, down from 11.2% the year before. The central government deficit decreased to 3.2% of GDP in 1999, down from 3.3% from the year before. On a consolidated basis, including Central Bank losses and parastatal enterprise profits, the public sector deficit was 2.3% of GDP.

Controlling the budget deficit remains the single biggest challenge for the country's economic policy makers, as interest costs on the accumulated central government debt consumes the equivalent of 30% of the government's total revenues. This limits the resources available for investments in the country's deteriorated public infrastructure, investments in many cases that would result in higher quality infrastructure if not made through the many inefficient government monopolies.