Ex-Central Bank President Says Costa Rica Unlikely To Go Into Recession

QCOSTARICA – The possibility of the country falling into economic recession in 2022 and 2023 is unlikely, assured Rodrigo Cubero, former president of the Banco Central de Costa Rica) – Central Bank, who participated as a panelist in an activity organized by BAC Credomatic.

Rodrigo Cubero, former president of the Central Bank, in a conference, Friday August 5.

In a conference organized by the private bank, on Friday, August 5, Cubero added that it expected a slowdown in Costa Rica’s production in the coming months, and that growth in the coming quarters would slow, but not reach negative numbers, making Costa Rica unlikely to fall into recession.

Rising prices for goods and services – the highest in 13 years –, rising interest rates and rising fuel prices are making families more prudent in their spending.

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All this is a consequence of the post-pandemic effects, the container crisis and the war between Ukraine and Russia, which are external factors affecting the country.

“I think we can’t rule that out (a recession), but I don’t see it as the base scenario, which is to say I don’t see it as the most likely scenario, certainly the Costa Rican economy is going to slow down in the rest of 2022, we had a relatively robust first half of 2022, in terms of economic growth, but we are going to face a circumstance, a slowdown in the national economy due to the much less favorable external environment,” Cubero said, La Nacion reported.

Cubero explained that there are three reasons why he considers a recession in Costa Rica to be unlikely, the first is arithmetic because growth in the first half of 2022 was already high, the second reason is that foreign direct investment shows a positive behavior, and thirdly, there are sectors that still have room to continue the recovery after the pandemic, such as transport and tourism, and which contribute to growth.

“We still have a process of recovery in the sectors that have been most affected by the pandemic, in particular the tourism sector and the transport sector, which have not yet reached pre-pandemic levels, and have room to grow at relatively high rates and on average. This would help mitigate the impact of the downturn,” Cubero said.

According to Cubero, the measures announced by the Central Bank to curb inflation, as well as the increase in monetary policy rates, the minimum legal reserve and the liquidity reserves of cooperatives and solidarity associations, will cause a contraction in consumption. and slow down the growth of production and the possibilities of job creation.

As for commodity prices, the former head of the Central Bank said that prices have reached the ceiling and that there is already a slowdown in international commodity prices due to the expected weaker global growth and therefore lower demand.

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“What the central banks of the world are trying to do is precisely to contain inflation as much as possible now so that it does not increase, and above all, that inflation expectations do not increase in the future. future, which would make it much more costly to lower it in terms of how much the interest rate needs to be adjusted in the future, then the faster the expectations of economic agents respond to these interest rate expectations, the less we will have to raise the interest rate tomorrow,” Cubero said.

With notes from La Nacion and La Republica.

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