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Economy & Business - December 2019

COSTA RICA: Balancing act: budget cuts and economic growth

In December 2018, following years of budget deficits and an increase in public debt, the centre-left Partido Acción Ciudadana (PAC) government led by President Carlos Alvarado finally approved a fiscal reform law. While the new legislation continues to generate much debate and opposition, the government is hoping that its objectives of limiting government spending and increasing revenues will allow it to invest in growing the economy and shoring up employment. Yet credit-rating agencies still see potential risks in the state finances, while the resignation in October of Rocío Aguilar as finance minister has not reassured rating agencies. The budgets cuts required for the reform also imperil the government’s ability to deliver on key promises.

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