Overview

Costa Rica is a development success story in many respects. Considered an upper middle-income country, Costa Rica has experienced steady economic expansion over the past 25 years. The post-1980s economic growth is the product of a strategy of outward-oriented growth, based on openness to foreign investment and gradual trade liberalization.

Costa Rica is also a global leader for its environmental policies and accomplishments, which have helped the country build its Green Trademark. The pioneering Payments for Environmental Services (PES) program has been successful in promoting forest and biodiversity conservation; making Costa Rica the only tropical country in the world that has reversed deforestation.

The combination of political stability, a social compact, and steady growth has resulted in one of the lowest poverty rates in Latin America and the Caribbean. Using the poverty and extreme poverty lines of US$4 per day and US$2.5 per day respectively, in 2014 just 12 percent of the Costa Rican population was considered poor, and 4.6 percent extremely poor (about half of the Latin America and Caribbean average).

Moreover, only 1.6 percent of the population lives under the global US$1.90 poverty line. The country’s success over the past decades is also reflected in its strong human development indicators, which continue to rank higher than those of other countries in the region.

Costa Rica’s GDP per capita has tripled since 1960 and its growth averaged 4.5 percent between 2000 and 2013, compared to the regional average of 3.8 percent for the same period.

During the global crisis, real GDP growth slowed to 2.7 percent in 2008 and contracted to 1 percent in 2009. The economy rebounded following the crisis, achieving an average real growth rate of 4.9 percent between 2010 and 2012. Growth decelerated to 3.5 percent in 2013, and to 2.8 percent in 2015. This year it is expected to pick up to 3.3 percent and the prospect for 2017 is for an increase to 3.6 percent.

Despite the solid growth over the past decades, two pressing development challenges stand out: the deteriorating fiscal situation and stubborn inequality. These affect the basic pillars of development: inclusion, growth, and sustainability.

The new government seeks to address these problems and is committed to an inclusive society that guarantees the welfare of its people, supported by transparent and accountable public institutions.

Last Updated: Sep 19, 2016

The World Bank and the Government of Costa Rica developed the Country Partnership Framework (CPF) for 2016-2020 to strengthen the World Bank-Costa Rica relationship.

This CPF reflects analytical underpinnings from the Systematic Country Diagnostic, and is the fourth prepared for Costa Rica following a period of limited Bank engagement.

The preceding CPFs established a framework for a closer partnership between the World Bank Group (WBG) and Costa Rica based on mutual learning and knowledge sharing.

The current CPF features a highly selective program that is organized around the following two strategic pillars:

  • Reducing constraints to productive inclusion; and
  • Bolstering fiscal, social and environmental sustainability.

Based on this new CPF, the WBG is supporting the Government’s efforts to bolster fiscal sustainability, increase the efficiency of its fiscal management, and strengthen its capacity. Cooperation also includes a health loan in the amount of US$420 million to support the efforts of the Government to improve the timeliness and quality of the universal health insurance system.

The WBG is also working toward a green and inclusive growth of the rural territories through mainstreaming sustainable management practices and decision-making support systems in productive landscapes. These territories are productive both for their natural beauty but also for the activities developed there (agricultural, forestry, fisheries, tourism, and others). Support also aims to improve competitiveness of rural supply chains.

The active portfolio in Costa Rica includes three projects totaling US$685 million in net commitments. 

Environmental and climate change interventions continue to be supported through trust funds, such as the Forest Carbon Partnership Facility, Costa Rica’s REDD+ strategy, and Partnership for Market Readiness. The country is working to institutionalize Natural Capital Accounting (NCA) with support from the Wealth Accounting and Valuation of Ecosystem Services (WAVES) initiative.

Last Updated: Sep 19, 2016

Pro-Productive Inclusion

Through the Higher Education Project, Costa Rica’s public higher education system benefitted by an improvement in access and quality. Enrollment in undergraduate programs has reached nearly 100,000 students (end target for 2017: 102,814); and in graduate programs more than 7,000 (end target for 2017: 7,524).  The total number of officially accredited programs in the four universities participating in the Project has reached 88 (end target for 2017: 85).  In the area of infrastructure, there are more than eight projects under construction, including new schools and faculties, research laboratories and dormitories.

The Equity and Efficiency of Education Project, aimed to improve education in terms of access, quality, completion, and equity, and helped build 75 schools and 230 classrooms and provided scholarships for 184,000 students, as well as transportation to schools for almost 100,000 beneficiaries.

Through Reimbursable Advisory Service (RAS) for health sector, the WBG helped develop a roadmap to increase efficiency and quality of health services over the short and medium term. The results of this RAS are used by the Government to develop a medium and long-term strategy to enhance sustainability and equitable access to services provided through social health insurance.

An array of analytical work has been completed in recent years, among others, a case study known as Primary Health Care Achievements and Challenges within the Framework of the Social Health Insurance, the Costa Rica Social Sector Expenditure and Institutional Review, research series on green and inclusive growth, a working paper titled A Behavioral Approach to Water Conservation, and a 2015 gender assessment.

Pro-Fiscal, Social and Environmental Sustainability

The Ecomarkets II Project increased Costa Rica’s Payment for Environmental Services (PES) contract coverage and land areas under PES coverage. The number of small and medium sized landholders participating in the PES program increased significantly by 120 percent between 2008 and 2014, exceeding both the original and revised target values of 50 and 85 percent, respectively. Also, since 2014, 296,904 hectares of land are maintained annually under PES contracts, which represent an increase of 19 percent compared to the baseline value of 250,000 hectares in 2008, providing environmental services of local and global importance.

Through Disaster Risk Management (DRM) programs, Costa Rica’s preparedness to respond to disasters has further improved with risk reduction and prevention programs. The regulatory and institutional DRM framework was strengthened with the introduction of a legal framework that requires all new public investments to follow DRM best practices and include a hazards assessment. This enhanced capacity of Costa Rica to implement its DRM program was supported by the WBG’s CAT DDO (Catastrophe Deferred Drawdown Option), which continues to provide a source of immediate liquidity in case of disasters.

Last Updated: Sep 19, 2016


LENDING

Costa Rica: Commitments by Fiscal Year (in millions of dollars)*

*Amounts include IBRD and IDA commitments