COSTA RICA: Positive economic news

CENTRAL AMERICA - In Brief 07 Nov 2023 by Fernando Naranjo

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The last few weeks have been marked by positive news for Costa Rica's economy. First, the EU recently removed the country from the tax haven blacklist as a result of the amendments approved by the Legislative Assembly to the foreign exemption regime. This is a major accomplishment because it removes possible sanctions of becoming a non-cooperative jurisdiction for tax purposes. The second was the agreement, at staff level, with IMF in the fifth review of the Extended Fund Facility (EFF) program. Despite high interest rates, relatively elevated prices and strong appreciation of the Colon, Costa Rica´s economy overperformed well. The Fund is now forecasting a Real GDP growth of 5.0% for this year with a slight moderation in 2024. The staff approved a new disbursement of $756 million in December 2023. This will help attend debt maturities and interest payments in the next 14 months that account for almost $2.1 billion. In third place, as a result of the healthier fiscal situation, two credit rating agencies upgraded Costa Rica´s long term ratings. S&P upgraded to BB- based on a stronger financial performance and growth perspectives, while Moody´s upgraded the debt rating to B1 from B2. The country is still far from obtaining again an investment grade, but the improvement in both ratings is a good sign. In fourth place, Costa Rica placed $1.5 billion in external bonds with a maturity of 31 years and a yield of 7.75%, a level that was expected. The improvement in the credit ratings was not reflected in this recent Eurobond placement. The government has congress authorization to place external debt bonds for $2.0 billion in of the next two years. The Ministry of Finance will...