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Overview

Costa Rica has in many ways been a development success story. An OECD member country since 2021, it offers a unique trajectory underpinned by a long tradition of democratic stability and institutionality while earning a reputation for being at the forefront of green development outcomes, being the first tropical country in the world to have reversed deforestation. The country has achieved all this while also moving to strengthen its macroeconomic fundamentals with growth averaging over 3% over the last decade, reaching 5.1% in 2023, surpassing expectations. This has been anchored by an outward-oriented model that has successfully targeted foreign investment and promoted gradual trade liberalization.

Despite these strong foundations, the development model thus far is facing significant threats. Inequality is high. With a GINI coefficient of 46.7 in 2023, Costa Rica is among the most unequal OECD member countries. Moreover, even though poverty levels have declined following the COVID-19 pandemic, reaching 22% of households in 2023 according to the National Institute of Statistics and Censuses (INEC), this process has been slow despite the country’s ongoing economic growth. The pandemic also exacerbated challenges to the social compact. Despite continued investments in education for instance, deficits in learning outcomes worsened, exacerbating existing inequities. 

Finally, despite the commendable efforts on deforestation, the country’s emissions have increased rapidly in the last two decades and could continue to grow in the absence of emission reduction reforms. Costa Rica also remains vulnerable to natural disasters with 78% of the population at high risk from multiple hazards.

These challenges are taking place in a context of broader global considerations including a recent increase in migration levels. The country is also facing perceptions of higher crime levels tied to the drug trade. They present nevertheless an opportunity for Costa Rica to consolidate and preserve some exemplary gains while addressing underlying threats to its development model.  

It will be crucial for Costa Rica to undertake measures to promote inclusive growth while continuing its efforts to consolidate an effective fiscal management strategy. The country needs to put in place the conditions for growth to be broad-based, and to fully reach its workforce and territory. Improving revenue mobilization and spending efficiency, especially in the social and infrastructure sectors, will be essential to tackling poverty and inequality, while strengthening climate resilience, reducing emissions, and consolidating the sustainability of its model.

Last Updated: Oct 07, 2024

LENDING

Costa Rica: Commitments by Fiscal Year (in millions of dollars)*

*Amounts include IBRD and IDA commitments
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Country Office Contacts

San José de Costa Rica
Cynthia Flores Mora
Plaza Roble, Edificio El Patio, Piso 1 Escazú, Costa Rica
+(506) 2549-5806
+(506) 2549-5800
EEUU
1818 H Street NW. Washington DC, 20433
+1 202 473-1000