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2012 Economic Predictions Bring Little Cheer to Costa Rica

Article Summary:

Experts agree that 2012 will bring a year of little growth, low inflation and devaluation to Costa Rica, giving very little room for a cheery economic outlook. A pending tax reform, if approved, would alter the outlook, as economists agree that growth would be even lower, and nearly half also agree that inflation would be higher.

Photo Credit: Estrategia y Negocios

Original Article Text From Estrategia y Negocios via Google Translate :

Economy in Costa Rica: little optimism for 2012
The 30 economists surveyed by the weekly Financial forecast a GDP growth of around 3.3%, driven mainly by construction and trade sectors through domestic consumption. Interest rates remain at levels similar to 2011, while the exchange rate could vary between 3 and 6%, reaching between 520 and 540 colones to the dollar at the end of 2012.

The financial sector will play a key role in the performance of consumption. Banks provide credit to increase placement in 2012 at a similar pace in 2011, 13%, while the Central Bank estimates that the number will be located in the vicinity of 9.3%. The more credit managed to place these entities, the greater the boost to domestic activity.

Externally, the outlook is bleak. Europe is very close to recession, while the U.S. and China have mild growth prospects. Most economists believe that exports of Costa Rica will have a slight increase, while FDI could be maintained by the telecommunications and insurance.

In terms of inflation, there is a consensus that can be controlled without major problems, ranking from year to between 6% and 7%. If domestic demand does not grow, they should not prices, argues economist Luis Mesalles.
Into this somewhat optimistic outlook is the high fiscal deficit. Mesalles’s view, the solution is not the current level of 5.5% as a percentage of GDP would bring very negative consequences in the medium term, especially if the economy moves into recession.

“Although the 2012 economic growth worry and employment, the fiscal deficit will remain the first point of attention of economic policy and depending on how it resolves, and the consequences for growth, inflation, exchange rate and interest rates, “sums Elfinancierocr.com.

If approved, the tax reform, the odds would be altered. Economists agree that the growth would be even lower, and nearly half also agree that inflation would be higher. In the long term, respondents showed divided opinions: half believe that the package will grow the economy, while others believe that no impact.

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