Costa Rica

Moderating economic growth, but still comparing well in the region

Costa Rica’s economy closed 2025 with an estimated growth of 4.0%, consolidating one of the most robust performances in Latin America in recent years. The result reflected a combination of strong dynamism in the external sector, consistent expansion of domestic demand, and a very lowinflation environment, which supported real income gains throughout the year. GDP growth was relatively broad-based, although it was led by higher valueadding sectors in freetrade zones with strong international integration such as medical devices, electronic components, technology, and business services. Companies operating in freetrade zones continued to play a central role, benefiting from the repositioning of global value chains and nearshoring strategies aimed at the North American market. Domestic demand also showed solid performance. The monetary easing cycle conducted by the Central Bank of Costa Rica since 2023 and reinforced by deflation observed over several months of 2025 significantly reduced credit costs, stimulating household consumption and private investment.

A moderate slowdown in growth is projected for 2026, albeit at a continued strong pace compared with the regional average. The moderation stems mainly from base effects after several years of strong expansion, as well as expectations of slightly softer global growth. Moreover, exports to the US, which were marked by briskness in anticipation of tariffs, could decelerate. Even so, the main structural drivers such as integration into dynamic global value chains, expansion of high valueadding sectors, competitiveness and productive diversification remain intact. The hightechnology sector should continue to support exports (despite the planned shutdown of the Intel plant), while favorable monetary conditions and controlled inflation are expected to sustain domestic demand. Domestic demand will continue to be robust.

Minor current account deficit easily financed

In 2025, Costa Rica’s maintained its slim current account deficit, supported by strong momentum of high valueadded goods exports and resilience of the services sector. The expansion of external sales—especially in medical devices, electronics and business services offset the increase in imports associated with buoyant domestic demand and rising investment. The goods component was characterised by two simultaneous trends. First, exports continued to grow, driven by companies operating in freetrade zones, which benefited from the strengthening of production chains geared toward the North American market. Second, the appreciation of the colón (CRC) throughout the year stimulated imports of consumer goods as well as inputs and capital goods, thereby increasing demand for foreign products. This exchangerate effect helped contain inflationary pressures but also contributed to a wider trade in goods deficit outside the special free trade zone regime. In the services sector, tourism and business services continued to play an important role in the external balance. Although tourism growth moderated after the postpandemic peak, the sector continued to generate substantial foreigncurrency income. In addition, corporate and technology services strengthened the positive services balance. The financing of the current account deficit in 2025 was largely covered by robust inflows of foreign direct investment. These inflows—concentrated in advanced manufacturing and knowledgeintensive services—supported balanceofpayments stability and helped keep the colón at an appreciated level. The high level of international reserves (equivalent to 6 months of imports at end-January 2026) also reinforced exchangerate stability throughout the year.

A slight widening of the current account deficit is projected for 2026 that mainly reflects two factors: a moderation in export growth after 2025’s strong expansion and the continued strength of imports driven by investment and domestic demand. The expectation of durably solid economic growth should sustain internal absorption and maintain pressure on the trade balance. Exchangerate dynamics will be a key element for the external scenario in 2026. If the colón appreciation trend continues, the competitiveness of certain exporting sectors will stay under pressure, thereby potentially widening the trade deficit in traditional goods. Second, continued strong foreign direct investment inflows are expected to comfortably finance the current account deficit, with persistently large profit repatriations by foreign companies acting as a counterpart.

Fiscal consolidation trend will continue

In 2025, Costa Rica’s fiscal performance reflected a continuation of the consolidation process initiated in previous years amid solid economic growth and low inflation. The central government deficit closed the year at around 3% of GDP. The durably dynamic economic environment supported tax revenues, particularly those associated with consumption, imports and corporate activity, which enabled the primary balance to improve over the course of the year (1.3% of GDP). Moreover, low inflation helped reduce pressure on indexed expenditures, contributing to a more moderate pace of public spending growth. Another relevant factor was the decline in the average cost of public debt, driven by the policyrate reduction cycle implemented by the central bank (BCCR). The domestic share of public debt stands at 74%, while 64% of total debt is denominated in local currency (the colón), the rest being in USD.

Under the baseline scenario, the fiscal trajectory for 2026 points to continued discipline, although with less headroom for additional shortterm improvements. The pace of economic growth will be a crucial determinant of revenue performance, while interestrate dynamics will influence the behaviour of financial expenditures. If the economy expands broadly in line with expectations, fiscal adjustment should continue in a gradual and controlled manner.

Incoming president holds congressional majority, with policy in line with right-wing predecessor’s

On 1 February 2026, Laura Fernández, candidate of the new Partido Pueblo Soberano (PPSO), won the presidential election in the first round after securing 48.7% of the vote. Her victory reflects the recent trend of an increasing number of rightwing candidates in Latin America, a trend that has also been observed in Chile, Ecuador, and Honduras. In addition to being elected President, the PPSO secured a simple majority in Congress, gaining control of 31 out of 57 seats — still short of the 38 required for a supermajority needed to pass constitutional reforms or deeper structural changes. This means that ambitious initiatives — especially in areas such as judicial reform or institutional changes — will continue to require negotiation with opposition parties. The current composition of the Legislative Assembly is as follows: 31 seats for PPSO, 17 for Partido Liberación National (PLN), 7 for Frente Amplio (FA), and 1 seat each for Partido Acción Ciudadana and Partido Unidad Social Cristiana. The lack of a supermajority presents a challenge for Fernández as among the 26 seats not belonging to the PPSO, 17 belong to the PLN — the oldest party in the country and its main political rival — while another 7 are held by Frente Amplio, a leftwing party that has historically advocated a strong opposition stance.

Laura Fernández’s programme highlights the need to expand and modernise national infrastructure. Among her priorities is guaranteed access to drinking water for historically underserved communities — especially indigenous groups and rural areas. Her agenda also includes developing an appropriate concession model for the operation of the Port of Caldera, which is considered strategic for the country’s logistics and foreign trade. Additionally, she proposes to build two new airports — one in the southern region and another in the northeastern province of Limón, modernise the road network, and upgrade and expand the railway system for both cargo and passenger transport. Her agenda also includes developing tourism master plans, as well as strengthening combat against illicit trade, smuggling and illegal cattle slaughter. She also intends to modernise the agricultural sector. Last, she aims to strengthen Social Security Fund, by building new EBAIS (Equipos Básicos de Atención Integral de Salud) health clinics and introducing improvements to the pension systems.

Costa Rica, which has historically been recognised as one of the safest countries in Latin America, has in recent years begun to undergo unprecedented challenges to public security. The surge in homicides and the uptick in organised crime networks tied to international drug trafficking have significantly altered the national landscape. The country’s strategic location and port infrastructure have turned it into an key transit route for drug trafficking, which in turn has expanded the presence of transnational groups fighting turf wars and using sophisticated moneylaundering mechanisms, thereby putting pressure on state institutions. The deterioration is taking place in a country traditionally renowned for its institutional stability and an absence of armed forces since 1949, reinforcing the social perception that the pattern of risk and violence has changed profoundly. Given this context, President Laura Fernández’s main political goal revolves around public security. She proposes completing the construction of a highsecurity megaprison, inspired by models implemented by Nayib Bukele in El Salvador. She advocates to modernise the police force. Another important policy front is judicial reform. Among the measures under consideration are placing term limits on judges and improving appointment and evaluation mechanisms. International cooperation also plays a strategic role in her plan. Recognising the transnational nature of drug trafficking and money laundering, Fernández proposes introducing tighter coordination with foreign agencies — especially with US agencies — through intelligence-sharing, joint operations and structured partnerships.

Last updated: February 2026