San José, Costa Rica, since 1956

Signs of Tentative C.R. Economic Recovery Appear

As world markets become increasingly upbeat about growth spurts, Costa Rica’s economy might be showing signs it has inched passed the worst of the economic crisis.

“While still in recession, the rate of (Costa Rica’s) economic contraction has begun to slow,” Central Bank analyst Elvia Campos told The Tico Times this week.

Economic activity increased by an annual rate of 5.9 percent in the second quarter, according to calculations by the San José-based financial consulting firm Aldesa.

The surge came after first-quarter performance had slipped 0.9 percent. All told, however, Aldesa reports a decline of 3.9 percent in activity in the first half of this year, compared to the first half of 2008.

For a genuine recovery to begin, Campos said, the manufacturing, agriculture and commerce sectors all must show positive growth, a turnaround the Central Bank expects to see within the second half of 2010, Campos said.

Up-to-date labor market data in Costa Rica is hard to come by, as statistics officials only gather and reveal the unemployment rate once a year. Last year’s jobless rate reached just below 5 percent. Followingvthousands of layoffs in late 2008 and 2009,vparticularly in the manufacturing andvconstruction sectors, some analysts thisvyear estimate the unemployment rate could hover above 7 percent.

But the grim labor landscape could see bright spots before year’s end, according to new report by leading employment services provider Manpower. The firm’s survey of the fourth-quarter hiring plans of 620 companies indicates an impending rebound from prior quarters. According to the report, the “net employment outlook” – which subtracts the percentage of planned job cuts from the percentage of planned hirings – rose to +6 points, compared with a one point decline in the pre-third-quarter survey. However, the outlook remains bleak when compared with 2008’s fourth-quarter result of +29.

Nevertheless, 15 percent of employers surveyed plan to expand their workforce, which signals that companies may be poised to increase their output in the next three months. Reports from abroad are looking up.

Latin American countries such as Argentina, Brazil, Chile, Colombia and Peru have begun to show signs of recovery, said the United Nations Economic Commission for Latin America and the Caribbean (ECLAC), according to newswire DPA.

The report said ECLAC predicts a 3 percent growth in the region’s gross domestic product (GDP) in 2010. Costa Rica’s Central Bank forecasts 2.6 percent GDP growth for next year.

France, Germany, Japan and the United States also have reported “green shoots” – or signs of recovery from the economic crisis.

Costa Rican economists have noted that this export-oriented Central American economy will gain from their turnaround.

“The green shoots that have emerged in the United States seem to have had a positive impact on our exports,” said Luis Mesalles, president of economic think tank Academia de Centroamérica.

But some analysts remain cautious. “We think it is too soon to conclude that the turnaround is sustainable,” said Eric Vargas, Aldesa’s manager of investment strategy. He said Costa Rica has drained its liquidity to the point it will be “a drag on the recovery, which in our opinion will lose strength in the coming quarters.”

–Alex Leff

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