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 that has 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 10.7 percent between 2010 and 2016.
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 needs to focus on maintaining the steady growth, and in continuing poverty reduction amid the COVID-19 (Coronavirus) pandemic which has hit hard Costa Rica.
The country now faces the risk of a sudden interruption in capital flows. The Gross Domestic Product (GDP) is projected to fall in 2020 to -5.4 percent. Poverty and unemployment are expected to increase, partly due to the impact of the health emergency on tourism and trade, plus a contraction in areas such as agriculture and construction. However, a rebound is expected by 2021 as restrictions are lifted and supported by accommodative monetary policy and reforms related to the Organization for Economic Cooperation and Development (OECD) accession process, along with fiscal consolidation efforts.
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: Oct 09, 2020