The International Monetary Fund (IMF) Executive Board has concluded its 2025 Article IV Consultation with Costa Rica, as announced on May 13, 2025. The consultation, which was completed on May 12, evaluated the economic progress of Costa Rica.
Costa Rica's economy has shown significant improvement attributed to strong fundamentals and effective policies. Since 2021, GDP growth has averaged over 5% annually. Inflation is nearing the Banco Central de Costa Rica’s target of 3%, public debt has decreased below 60% of GDP, and international reserves are stable.
The IMF expects continued robust growth despite external challenges. For this year, growth is projected to moderate to around potential at approximately 3½ percent. The current account deficit may slightly increase to 1.8% of GDP, while the primary surplus is expected to rise to about 1¼ percent of GDP due to ongoing fiscal consolidation efforts. Inflation should return to target levels by 2026.
Potential risks include weaker external demand and tighter global financial conditions that could impact exports and foreign direct investment (FDI). However, Costa Rica's strategic location and diversified economy are seen as strengths for sustained growth.
In their assessment, Executive Directors praised Costa Rica's economic achievements supported by strong macroeconomic policies and reforms related to its OECD membership process. They acknowledged the completion of IMF-supported programs and emphasized maintaining prudent policies amid global uncertainties.
Directors highlighted the importance of continuing fiscal consolidation while keeping spending under control according to fiscal rules. They also recommended tax reforms aimed at increasing equity and efficiency. Full implementation of public employment law across institutions was urged without delay.
Monetary policy received commendation for its forward-looking approach. Directors noted there might be room for policy rate cuts if inflation convergence weakens but stressed legislative improvements for BCCR governance are necessary.
Financial soundness indicators remain stable; however, recent issues with non-bank financial institutions underline the need for a strong supervisory framework. Amendments to bank resolution laws were encouraged alongside monitoring FX lending risks.
Supply-side reforms were recognized as essential for sustaining economic performance in Costa Rica. Enhancing infrastructure quality and addressing skills mismatches can bolster growth potential further integrating climate considerations into public investments was advised for resilience against natural disasters.