Costa Rica will face an economic slowdown this year, analysts say


April 26th, 2013 ( Costa Rica will face an economic slowdown this year due to slowing external demand, which will affect exports and job creation, local analysts said yesterday.

The study, titled “Economic and Political Balance for Q1 2013,” was developed by the School of Economics at the National University.  The study casts criticism on President Laura Chinchilla’s management of the economy and paints a bleak economic outlook for this year.

Economist Henry Mora said that the economic growth achieved in 2012 – 5.1% – would not be achieved this year, and even the Central Bank’s forecast of 4% growth is in jeopardy.  Mora expects growth to be around 3.5%.

Mora said that the growth slowdown is caused by the lack of external demand as well as falling domestic demand so far this year.

Mora explained that Costa Rica’s primary export destinations – such as the U.S. and Europe – have moderate or no growth, while others such as China – whose economy is still growing – purchase few Costa Rican exports.

Mora said that because of falling export demand, he expects job creation to come in at just 3%, which will be “insufficient to reduce unemployment and reverse the trend of higher unemployment and precarious jobs.”  Costa Rica’s unemployment rate is currently around 10%.

The economist recommended measures to boost domestic demand, such as removing the restriction on credit growth that has been imposed by the Central Bank, improving the methodology used for rate adjustments, and policies promoting competition in health care and private education.

Meanwhile, sociologist and political scientist at UNA, Carlos Carranza, said that President Chinchilla has failed in her decision making during the first quarter of this year.

“This is a government that is not making appropriate decisions,” Carranza said, “…which is causing a growing number of social movements.”

Carranza said that among the government’s failures is a lack of political leadership surrounding the country’s infrastructure issues, as well as situations of questionable ethics – such as irregularities noted by the media surrounding the northern border road with Nicaragua and the failed attempt to provide the Brazilian company, OAS, with the San Jose – San Ramon highway concession.

Carranza also criticized that there is “inadequate management of the government’s image,” lawmakers “stuck” on important issues, and “little analysis of complex situations” facing the country.

On a positive note, Carranza highlighted the “positive foreign trade policy,” as well as improvements in security, railway service and education.

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