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Costa Rica could rebound by 2010

Although the economic indicators are grim, the International Monetary Fund has offered a ray of hope for Costa Rica. The country will likely rebound by 2010, with output growth of 1.5 percent, an IMF representative said Monday morning, reports business newspaper El Financiero's website .

It's a sad day when 1.5 up is a cause for celebration, especially following several years of continuous growth in the region.

But Costa Rica's overall economic output has slumped for six months in a row, prompting a growing number of analysts to cry “recession.” Manufacturing and construction are among the hardest hit sectors. The country is also getting hit by sliding exports and waning tourism figures (as I will report in an upcoming dispatch).

However, Elvia Campos, a chief number-cruncher with the Central Bank, told me that whether it's a recession sort of depends on how you crunch the numbers. Economic activity has not yet shrunk across the board, she said, and some sectors are actually seeing positive — albeit slower than last year — output growth and employment. Moreover, recession is near but not yet in full force, she said. (The Central Bank's words should be taken with a grain of salt, however, as Tico officials are loath to pronounce the “R” word.)

Presenting the IMF's Regional Economic Outlook for May, the Western Hemisphere deputy director, Miguel Savastano, shined another little bright spot Monday on an otherwise gloomy situation: 0.5 percent growth projected for 2009 and 1.5 percent for 2010.

The IMF applauds Costa Rica's efforts to support financial liquidity and increase state spending to buffer the effects of the global economic crisis. For this, the IMF forecasts this region in general will weather the storm slightly better than wealthier nations of the north.

“We project (Latin America and the Caribbean) LAC growth will rebound to about 1½ percent by 2010, in line with global growth but at a faster pace than in advanced economies. This is supported by the absence of systemic banking problems in the region, which would allow LAC economies to resume growth more quickly than in regions where severe problems persist in the financial sector. In addition, the greater scope for countercyclical policies, including to sustain public spending on infrastructure and social safety nets, would support growth going forward.”

--Regional Econonomic Outlook: Western Hemisphere, IMF (click here to download the full report).

However, Costa Rica's expected growth would fall a hair short of Central America's overall, projected at 1.1 percent in 2009 and 1.8 percent in 2010.

Meanwhile, Ticos seem to be talking less about how the U.S. screwed everything up for them. But if you ask some analysts directly, they'll list a host of problems that came courtesy of "Estados Unidos." Looking back to April, when I was reporting for GlobalPost's "A World of Trouble, the Sequel," several economists answered the multiple choice question "Which of America's problems are being blamed for the problems?" "e) all of the above". And one even added, "you forgot to include widespread corruption." Oh, right (ouch).

Blaming aside, IMF optimism should be well received. I wouldn't be surprised if the promise of recovery itself actually helps spur on a recovery. Funny how the markets work.