Costa Rica accumulates fiscal deficit of 3.89% of GDP through September 2021

RIO DE JANEIRO, BRAZIL – Costa Rica reached a fiscal deficit of 3.89% of Gross Domestic Product (GDP) in the first nine months of 2021, lower than the 6.43% posted in the same period last year, the Ministry of Finance reported Monday.

As of September, the country accumulated a financial deficit of some US$2.4 billion (3.89% of GDP), but a primary surplus (without interest payments on debt) of close to US$160 million (0.26% of GDP).

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Official data show that the second-highest monthly primary surplus of 0.19% of 2021 was presented during September, as revenues reached 1.39% of GDP and total expenditures without interest 1.20% of GDP.

“The achievement of a primary surplus in September 2021 signals to us that the fiscal adjustment is on the right track and is a clear sign of the commitment of the Executive Branch to fiscal sustainability. This commitment must be complemented with the approval of the initiatives under discussion in the Legislative Assembly,” said the Minister of Finance, Elian Villegas.

According to Costa Rican authorities, the country must consolidate the fiscal adjustment agreed with the International Monetary Fund (IMF), which seeks to make primary surpluses permanent and make debt increasingly sustainable.

“These results also allow us to visualize that our country will begin to reduce the debt as of 2023, while most of the world’s economies will do so as of 2026, as the IMF itself estimates in its Fiscal Monitor, published the previous week,” Villegas highlighted.

Meanwhile, interest payments in the first nine months of 2021 reached 4.15% of GDP, the highest number in the last 15 years.

Data from the Ministry of Finance also revealed that as of September 2021, the Central Government debt amounted to 71.27% of GDP, which is why the entity has been creating reserve funds to meet the maturities of the last quarter of the year.

Costa Rica closed 2020 with a fiscal deficit of 8.34% of GDP, a figure aggravated by the effects of the Covid-19 pandemic on the economy. In 2019, the country recorded a deficit of 6.94% of GDP.

At the beginning of the year, the country signed an agreement with the IMF to access US$1.75 billion in exchange for a series of fiscal adjustments, including a controversial bill to reform the public employment scheme and reduce the payment of salary bonuses. This bill is being studied by Congress and is rejected by the labor sector.