Costa Rica's Growth to Continue to Moderate from Post-Pandemic Highs

• Costa Rica's GDP growth is forecast to slow to 3.9% in 2026, following a 4.6% expansion in 2025, as the economy returns to its pre-pandemic trend rate of around 3.8% real growth. This moderation follows an average annual expansion of 5.4% between 2021 and 2025, with 2025 growth driven primarily by exports (+3.8%) and private consumption (+2.5%), supported by the free trade zone manufacturing sector and 75 basis points (bps) of monetary easing by the central bank (BCCR).
• Private consumption will remain the backbone of growth in 2026, underpinned by a favourable inflation environment and continued monetary easing. The BCCR has cut rates by 575bps since early 2023, bringing the policy rate to 3.25%, with scope for an additional 25bps cut before year-end. Inflation turned negative at -2.53% year-on-year in January 2026, supporting real household incomes alongside a 1.6% minimum wage increase, while unemployment held at a manageable 6.3% in December.
• Export growth is expected to moderate in 2026, partly due to the colón's continued strength, which appreciated a further 4.6% in February to CRC474/USD. However, the impact will be cushioned by ongoing U.S.-Costa Rica trade dialogue, depreciation pressure from a widening current account deficit, and the resilience of free trade zone industries. The services sector, which posted a US$6.5Bn surplus through Q3 2025, remains a key pillar, with high-value advanced manufacturing, business services, and medical devices anchoring the export base. However, tourism may face headwinds from both the strong currency and a rise in domestic crime.
• Public spending and fixed investment are expected to see only modest gains under President Laura Fernández, who has pledged to maintain fiscal consolidation. Government consumption contributed just 0.2pp on average to annual growth under her predecessor, and while Fernández has signaled some targeted spending on security and infrastructure, the scope for stimulus remains limited. Lower interest rates and continued inflows into high-value industries should provide some support to private investment.
• Risks to the outlook are skewed to the downside, driven primarily by fiscal constraints and deteriorating security conditions. Costa Rica's elevated public debt could force strict adherence to the country's debt-anchored fiscal rule, curtailing growth stimulus. Meanwhile, if crime is not brought under control by the new administration, it risks dampening business activity and discouraging multinational investment in the country.

(Source: BMI, a Fitch Solutions Company)