Costa Rica is a development success story in many respects. An upper middle-income country, Costa Rica has experienced steady economic expansion over the past 25 or so years. The post-1980s economic growth is the product of a strategy of outward-oriented, export-led growth, openness to foreign investment; and gradual trade liberalization.
The economy grew at an annual average rate of 5% throughout the 1990s and generally outpaced the average growth rate for the region in the current millennium.
Although Costa Rica was able to press the poverty rate down from 20.2% in 2006 to 18.5% in 2009, for 2010 and 2011 the average percentage of people living in poverty increased to 21.3 and 21.6, respectively.
Extreme poverty also decreased from 5.3 in 2006 to 3.5% in 2008, in line with the relatively high levels of growth and effective social transfer mechanisms. But, it increased to 6.0 in 2010, and 6.4 in 2011, as growth largely benefited skilled labor, and secondary education presented lags, especially among Costa Rica’s poor.
By 2010, Inequality also rose.The Gini coefficient went from 0.439 in 2009 to 0.434 in 2010.
GDP growth reached a peak of 8.8% in 2006 and maintained a healthy pace in 2007. As a consequence of the global financial crisis in 2008 the country’s economy registered a decline of 1.3% of GDP in 2009. In response, the Government increased its spending in social and labor-intensive infrastructure, helping the economy recuperate to a 5.0% GDP in 2010, and 4.4% in 2011
The Costa Rican economy registered a GDP of 3.4% in 2013, compared to 5.1% in 2012. Current projections foresee a GDP growth between 4.3. and 4.1% over the next few years, driven by private consumption and domestic investment.
As the country faces rising levels of crime, the Government has prioritized citizen security by promoting initiatives to prevent violence and reinforcing activities to combat drug trading.
Costa Rica’s other medium-term challenges are associated with the efforts needed to continue to improve competitiveness and the business climate.
Last Updated: Apr 09, 2014