The jaguar, which until recently seemed strong and fast, jumping on the tops of the trees and their prey, now looks more tired, and instead of running, walks.
This metaphor illustrates the state of the country’s economy, which went from a growth calculation of 4.37 percent for this year (made in April), to 3.13 percent, according to the most recent estimates of the Institute of Research in Economic Sciences (IICE) of the University of Costa Rica (UCR), in its Quarter Analysis of the Economy: I Quarter 2024 and Projection for the Third Quarter 2024, published on July 22.
According to the IICE estimates, the growth range of gross domestic product (GDP) for this year would be between 3.21 per cent and 3.51 per cent, a significant decrease compared to the range calculated in April (from 3.99 per cent to 4.75 per cent). In addition, growth of between 2.88 per cent and 3.38 per cent is expected for the third quarter.
It should be remembered that the previous year the national economy grew by 5.1%, one of the factors that caused the Bank of America to compare it with a “jaguar” last February, but already for the first quarter of the same 2024 the growth was only 3.6%.
One of the reasons for this phenomenon is that the special regime has suffered a significant slowdown in its year-on-year production: it went from a growth of 16.09 % in the first quarter of last year to 6.20% in the first of 2024
In addition, the production of the definitive scheme does not take off, as it rose by just 0.45 percentage points (p. p.) from 2.77 % for the first quarter of last year to 3.22 per cent in the same period of 2024.
According to IICE, part of the explanation is due to the reduction in the growth rate of the export sector, mainly that of precision and medical equipment, which was significantly reduced. With regard to the country ' s domestic demand, only household expenditures grew year-on-year in a relevant manner. For its part, the construction sector has slowed its boom in the last year.
Household consumption sustains domestic demand
The expenditure of Costa Rican families remains the only one that shows a positive year-on-year change, as was also the case in the previous quarter. On this occasion, household consumption reported a 2.54 per cent change in GDP, compared with 2.26 per cent for the same period last year.
For its part, the government’s investment and consumption changes were almost imperceptible (0.05 per cent and -0.1 per cent, respectively), which is the norm since the fourth quarter of last year.
In terms of year-on-year growth in household final consumption expenditure, it rose from 3.63 per cent in the first quarter of 2023 to 4.12 per cent in the first quarter of this year. By breaking this percentage, it is observed that 2.22 percentage points (p. p.) correspond to services and 1.15 p. p.p. come from non-durable goods. In turn, the semi-during goods amount to 0.45 p. p. and the durable goods 0.30 p. p.
Taking into account economic activity, the one that contributed the most to the year-on-year growth of GDP for the first quarter were professional, scientific and technical years, with 0.79 p. p. Virtually all other activities had a small but positive growth, with the exception of construction, which contributed to -0.10 p.m.
The occupation recovers
The year-on-year occupancy rate had a recovery of 22.2 per cent between the first quarter of 2023 and the same quarter of this year. By contrast, hours worked in the main employment increased at a slower year-on-year rate by 1.1 per cent.
Decmented by work activity, seven of the 14 evaluated growth had an employment growth (5.75 p. p.), highlighting trade and repair (1.39 p. p.m.) and public administration (1.35 p. p. p.m.) as the most important. Among the other seven branches contracted (-2.83 p.m.), construction has the most significant reduction (-1.24 p. p.), followed by households as employers (-0.80 p. p.).
In terms of productivity per hour of work, this increased by 2.5 per cent between the first quarters of 2023 and 2024. Also year-on-year in the same period, the number of hours worked in the main employment improved. However, the IIEC makes the cave that this increase is less than GDP growth.
Low prices
The Consumer Price Index (CPI) is still low zero until June this year, a situation that remains in this way after more than 12 months. The IICE reports, however, that the rates of variation are increasing: the CPI in June was -0.00. %., showing a small growth of 0.30 p. p. compared to the year-on-year indicator in May.
In addition, the CPI less fuel, food and regulated goods obtained an annual percentage of 0.79 per cent in June, making this month the second consecutive above zero, after 11 months of negative figures.
According to the analysis, service prices are the only ones pushing upwards to the annual CPI. Other products such as food and drink, goods and transport, continue to show a negative effect that, together, reaches .03 p., although this is a figure closer to 0 than had been recorded in previous months.
The IICE projects that the CPI will continue to rise in the coming months and that it will approach the inflation range projected by the Central Bank of Costa Rica (BCCR): between 2 % and 4 %. It should be remembered that this coincides with the results of the latest Business Expectations Survey for the third quarter, in which 18.4 per cent of the entrepreneurship said they believed that prices would increase, against 6.45 per cent that it saw a fall.
Interest rates fall and exports grow
The IICE reports that the Central Bank again lowered the Monetary Policy Rate (TPM) in April, to estimate this indicator at 4.75 per cent, which has remained unchanged since then. This was his third consecutive reduction of the year and marks a downward trend that began in March last year.
With regard to the accumulated exports of the last 12 months, the trend with which it began the year continues: they continue to grow (and more) than imports. IIEC indicates that exports increased by 9.9 % to May and imports by 3.8 %. All this taking into account that the colony strengthened 5.4% against the dollar, between May 2023 and that same month of the current year.
Between May 2023 and 2024, the final scheme reported 34 per cent of total exports (almost 3 p. p. p. less than between May 2022 and 2023) and 80 per cent of imports, leaving the special regime (where free zones are present) 66 per cent of exports and 20 per cent of imports.
This means that exports of the special scheme grew by 14.5 per cent compared to the period between May 2022 and 2023, while exports of the final regime only increased by 1.9 %. For imports between the same periods, those of the definitive scheme increased by 7 %, while those of the special rate decreased by 7.5 %.
Finally, the IICE confirms that the entry of tourists into the country also continues to increase frankly, as a post-pandemia effect: between April 2023 and 2024, almost 2.9 million people entered the country.
Of course, this has had a direct impact on the amount of foreign exchange that entered national territory, which has also not stopped growing: while as of December last year each tourist contributed, on average, $1516, by April 2024 that amount reached $1681.
This article has been translated after first appearing in El Pais