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Economy & Business - March 2020

ECONOMIC HIGHLIGHTS

COSTA RICA | IMF warns on fiscal deficit. On 24 February the International Monetary Fund (IMF) released a statement, following a recent visit to Costa Rica, which describes the country’s large fiscal deficit as the main risk to macroeconomic stability, with public debt projected to exceed 60% of GDP in 2020. According to the IMF, “successful implementation of the fiscal reform approved in end-2018 and the fiscal rule that came into effect with the 2020 budget remain key to preserving macroeconomic stability and boosting confidence” and the successful issuance of a US$1.5bn Eurobond in November 2019 “helped reduce pressures on domestic interest rates even further”. However, it highlights that the central government primary deficit still rose to 2.8% of GDP in 2019 while the overall deficit rose to 7% of GDP, its highest level in over 30 years, owing to “a growing interest bill, higher capital spending, and payment of some transfers owed in 2018”. Overall the IMF said that “macroeconomic conditions remain broadly stable”, but growth remains “subdued”, with overall estimated GDP growth of 2.1% in 2019, which is projected to rise to 2.5% in 2020.

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