GDP growth will recover gradually to 2.5% in 2021 and 3.4% in 2022, supported by strong external demand from Costa Rica’s main trade partners. Domestic demand will strengthen in the second half of 2021, as economic restrictions are gradually lifted and the vaccine campaign progresses. Inflation will slowly increase, but remain below the 3% target rate as spare capacity remains large. An extended fund facility agreement has been negotiated with the IMF with the aim of putting public debt on a declining and sustainable path.
Implementing the public employment reform, reducing regressive tax exemptions and continuing to reallocate spending towards social protection would help to ensure debt sustainability, improve public spending efficiency and foster inclusiveness. Lowering administrative burdens and costs for starting and formalising businesses would help raise investment and formal job creation. Finalising the new insolvency law would streamline bankruptcy procedures and accelerate resource reallocation during the recovery.