Costa Rica’s Central Bank revises down 2015 growth forecast

(Archive)

July 31^st, 2015 (ICR News) Costa Rica’s Central Bank revised down its growth forecast for the country’s economy on Wednesday, projecting real GDP growth of 2.8% for 2015, down from its January projection of 3.4%.

The Bank also slightly lowered its growth forecast for next year, saying it expected to see 4% in real GDP growth in 2016, down from its previous forecast of 4.1%.

According to the Monthly Economic Activity Index (IMAE), the country’s economy has been slowing for 13 consecutive months.

Bank officials said a slowdown in agriculture (especially banana and pineapple) and manufacturing is largely to blame for the weaker-than-expected growth, in addition to the departure of Intel’s manufacturing operations in April 2014.

Bank officials also said that construction activity in the public sector has remained stagnant this year.

Meanwhile, the Bank said it would maintain its target inflation rate of 4%, (plus or minus one percentage point).

The Bank also increased its forecast for the government’s fiscal deficit this year to 5.9% of GDP, up from its 5.7% forecast in January, while lowering its deficit forecast for 2016 from 6.8% of GDP to 6.6%.

The country’s soaring deficit has led to a string of downgrades by international credit rating firms and investment banks.

In May, the United States’ largest bank by assets, JP Morgan Chase advised its investors to reduce their holdings in Costa Rican bonds, describing the country’s current situation as a “fiscal hemorrhage.”