Costa Rica: GDP growth picks up in Q2
GDP reading: Year-on-year GDP growth improved to 5.5% year on year in the second quarter from 3.6% in the first quarter. On a seasonally adjusted quarter-on-quarter basis, economic growth improved to 1.2% in Q2 from the previous quarter’s 0.7% increase.
Drivers: Government consumption rebounded, growing 0.4% in Q2 (Q1: -0.3% yoy). Fixed investment also bounced back, rising 10.8% in Q2, contrasting the 1.2% contraction logged in the prior quarter. Less positively, private consumption growth eased to 3.4% in Q2 (Q1: +4.2% yoy), marking the weakest expansion since Q4 2022.
On the external front, exports of goods and services increased 5.1% on an annual basis in the second quarter up from Q1’s 5.0% expansion: An acceleration in goods exports outweighed a slowdown in services exports. Meanwhile, growth in imports of goods and services picked up to 7.0% in Q2 (Q1: +3.0% yoy).
GDP outlook: Our Consensus is for the economy to lose steam in H2 and expand at a slower pace in 2024 as a whole relative to 2023. Cooling momentum in exports and softer expansions in private consumption and fixed investment will drive the deceleration. Key factors to monitor include the pace of monetary easing by the Central Bank of Costa Rica and the health of the U.S. economy.
Panelist insight: Analysts at the EIU commented on the outlook:
“The post-pandemic catch-up growth that has fuelled the expansion of the tourism sector in recent quarters has been exhausted, and a strong exchange rate is making Costa Rica a more expensive destination. We expect these factors to cap export growth in 2024.”