Overview

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Context
Strategy
Results

In many aspects, Costa Rica is a success story in terms of development. It is considered an upper middle-income country, which has shown a steady economic growth over the past 25 years. This growth resulted from an outward- oriented strategy, based on the 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 to have reversed deforestation.
The combination of political stability, social contract and steady growth has resulted in one of the lowest poverty rates in Latin America and the Caribbean, where the proportion of the population with incomes below US$ 5.5 per person per day decreased slightly from 12.9 to 10.6 percent between 2010 and 2019.
The success of the country in recent decades is also reflected in its strong indicators of human development, which have contributed to move the country up the global ranks, higher than the other countries in the region.
While these achievements are celebrated, the country faces economic and social challenges associated with the COVID-19 (Coronavirus) pandemic which has hit hard Costa Rica, and needs to continue building the foundations for restoring growth and continuing poverty reduction sustainably in the post-crisis.
Despite Costa Rica’s strong health system and timely crisis response, the pandemic had a heavy toll on its economy. Gross Domestic Product (GDP) is estimated to have contracted 4.6 percent in 2020, the largest drop in four decades, driven by sharp declines in investment and private consumption. One out of five workers were unemployed by Q4 2020. Despite strong mitigation efforts, an estimated 124,000 people fell into poverty, lifting the poverty rate to 13 percent in 2020. The crisis also interrupt Costa Rica’s incipient fiscal consolidation built on important reforms in 2018 and 2019.
However, the Gross Domestic Product (GDP) is expected to growth 2.6 percent in 2021, supported by improvement in external conditions, and recovering confidence of economic agents. As the vaccination campaign rolls out worldwide (and in Costa Rica), mobility restrictions are lifted and tourism fully recovers, growth is expected to accelerate to 3.3 percent by 2022. The recent accession to the OECD underpins structural reforms that further reinforce growth prospects.
In this context, two pressing development challenges stand out: the fiscal situation and persistent inequality. These challenges affect the basic pillars of the Costa Rican development model: inclusion, growth, and sustainability.
The government has strived 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: Apr 06, 2021
The World Bank and the Government of Costa Rica established a Country Partnership Framework (CPF) 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.
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 CPF, the WBG is supporting the Government’s efforts to bolster fiscal sustainability, increase the efficiency of its fiscal management, strengthen its capacity, manage its natural assets, and address climate change.
The active portfolio in Costa Rica includes five projects totaling US$1,011.74 million in net commitments. Cooperation includes a health loan in the amount of US$420 million to support the efforts of the Government to improve the availability and quality of the universal health insurance system.
Other projects, approved on March 2020, will support the Government in their policy response during the health crisis and after to ensure fiscal sustainability. The Sustainable Fisheries Development Project in the amount of US$75.1 million will help Costa Rica increase the sector’s productivity and sustainability and improve the livelihoods of coastal communities, while the Fiscal Management Improvement Project in the amount of US$156.64 million will ease tax compliance and border-closing costs and improve expenditure management.
Last June a US$300 million loan was approved. This was the first in a series of two operations to support Costa Rica’s Government program to protect people’s income and jobs from the impact of COVID-19 (Coronavirus), benefit small and medium enterprises (SMEs), reinforce fiscal sustainability in the aftermath of this health crisis, and to lay out the foundations for a strong post pandemic recovery by promoting green growth and low-carbon development.
Furthermore, on December 2020, Emission Reductions Purchase Agreements for US$60 million were signed. The agreements are for purchasing measured, reported and verified Emission Reductions (ERs) related to reduced deforestation and forest degradation (known as REDD+), the enhancement of forest carbon stocks at the national level in Costa Rica, and distribution of ER payments in accordance with an agreed Benefit Sharing Plan.
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”; in other words, those territories that are productive both for their natural beauty and, also for the activities developed in them (agricultural, forestry, fisheries, tourism, and others). Support also aims to improve competitiveness of rural supply chains.
Environmental, climate change, and disaster risk interventions continue to be supported through trust funds, such as the Partnership for Carbon Market Readiness (PMR), the Nationally Determined Contribution Just-in-Time (NDC JIT), the Forest Carbon Partnership Facility, the Global Partnership for Sustainable and Resilient Landscapes (ProGreen), and the Global Facility for Disaster Reduction and Recovery (GFDRR).
In addition, support was provided to enforce a Sustainability Protocol at the Reventazón Hydroelectric Plant of the Costa Rican Institute of Electricity, an international example that proves it is possible to develop hydroelectric projects applying the industry´s best environmental and social practices.
Regarding energy and transportation electrification, the World Bank supports the initiative to transition towards an energy model that optimizes the use of renewable resources. The decarbonization of the industrial and transport sectors is sought through the progressive electrification and diversification of the energy matrix, in an environment of greater regional integration and opening of international energy markets.
The following trusts support this undertaking: the Spanish Fund for Latin America and the Caribbean, the Korean Fund for Sustainable Growth, the Alliance for the support of the National Determined Contributions (NDCs) achievement and the Energy Sector Management Assistance Program (ESMAP). The training of technical teams and the design of financial instruments and sector plans outstand among the activities to achieve improvements, both in the regulatory framework for the electrification of public transport and in the integration of renewable energies in the electricity grid.

Last Updated: Apr 06, 2021
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 the target of more than 102,000 students, and in graduate programs more than 7,000. The total number of officially accredited programs in the four universities participating in the Project has also surpassed the target of 106. In infrastructure, there are more than thirty construction projects finalized, including new schools and university buildings, research laboratories and dormitories. The benefits provided to the indigenous people stand out, where the number of indigenous students enrolled in the four universities doubled between 2014 and 2017.
Through Reimbursable Advisory Service (RAS) for the health sector, the WBG helped develop a roadmap to increase the 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 the 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 gender assessment.
Pro-Fiscal, Social and Environmental Sustainability
Through the project "Strengthening of the Universal Health Insurance", the availability and quality of the universal health insurance system was improved, and the strengthening of the institutional efficiency of the Costa Rican Social Security Fund (CCSS). Under the Program for Results mode, objectives such as the reduction of waiting lists and the care of chronic diseases have been met. For example, the goal of 41 percent of patients with type II diabetes identified and with optimal clinical control was exceeded. The improvement in colon cancer screening also exceeded the goal by reaching 15 percent of the target population. In addition, expectations were exceeded in the percentage of surgeries performed on an outpatient basis where the goal of 43 percent was exceeded. One of the greatest achievements is in the expected percentage of the total number of health areas equipped with the Single Digital Health File (80 over 60 percent expected).
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 provided a source of immediate liquidity in case of disasters.

Last Updated: Apr 06, 2021