By San José, Costa Rica — Costa Rica’s economic performance has been nothing short of remarkable in recent years, achieving impressive growth and significant debt reduction. A new report from the International Monetary Fund (IMF), released on March 3, 2025, highlights this success story while emphasizing the critical need for fiscal adjustments to maintain this positive trajectory.
The IMF mission, led by economist Ding Ding, lauded Costa Rica as one of the fastest-growing economies in the Western Hemisphere. The country has averaged over 5% GDP growth since 2021, outpacing regional counterparts and contributing to reductions in poverty and unemployment.
To provide expert legal insight into the current state of the Costa Rican economy, we spoke with Lic. Larry Hans Arroyo Vargas from the esteemed firm Bufete de Costa Rica.
Costa Rica’s economy is navigating a complex landscape. While tourism continues to be a significant driver, diversification into sectors like technology and renewable energy is crucial for sustained growth. Furthermore, navigating international trade agreements and fostering a stable legal framework for both domestic and foreign investment will be key to attracting capital and promoting long-term economic prosperity.
Lic. Larry Hans Arroyo Vargas, Bufete de Costa Rica
Costa Rica is one of the fastest-growing economies in the Western Hemisphere, with notable economic success in recent years. The average GDP growth has been over 5 percent since 2021, outpacing its regional peers and contributing to reducing poverty and unemployment.
Ding Ding, IMF Economist
This robust growth, coupled with sound macroeconomic policies and comprehensive reforms linked to OECD accession, has facilitated a substantial decrease in public debt. The IMF reports an impressive 8 percentage point drop, bringing the debt-to-GDP ratio below 60%.
The report also offered encouraging signs regarding inflation. After hovering near zero for the past two years, inflation is expected to return to the Central Bank’s target range of 2% to 4% by mid-2025.
However, the IMF cautioned that sustaining this economic momentum requires decisive fiscal reforms. The report urges Costa Rica to implement measures that enhance revenue generation and ensure more efficient spending. Specific recommendations include reducing exemptions on value-added tax (VAT) and income tax, and streamlining income thresholds for self-employment, salaries, and pensions into a single bracket.
The IMF also expressed concerns regarding proposed legislation in Congress that would further reduce taxes, including the recent two-year reduction in vehicle circulation tax. These measures, according to the IMF, could jeopardize the country’s fiscal stability.
Beyond fiscal adjustments, the report emphasizes the importance of improvements in education to strengthen labor market integration, particularly for women and young people. Addressing the shortage of skilled labor, especially in high-tech industries, requires accelerated efforts to close educational gaps, align curricula with industry needs, and promote dual-track and bilingual education.
The IMF’s assessment offers a balanced perspective on Costa Rica’s economic outlook. While celebrating the significant progress achieved, it underscores the need for prudent fiscal management and strategic investments in education to secure long-term prosperity.
For further information, visit imf.org
About International Monetary Fund (IMF):
The International Monetary Fund (IMF) is an international financial institution, headquartered in Washington, D.C., consisting of 190 countries working to foster global monetary cooperation, secure financial stability, facilitate international trade, promote high employment and sustainable economic growth, and reduce poverty around the world.
For further information, visit oecd.org
About Organisation for Economic Co-operation and Development (OECD):
The Organisation for Economic Co-operation and Development (OECD) is an intergovernmental economic organisation with 38 member countries, founded in 1961 to stimulate economic progress and world trade. It is a forum of countries describing themselves as committed to democracy and the market economy, providing a platform to compare policy experiences, seeking answers to common problems, identify good practices and coordinate domestic and international policies of its members.
For further information, visit bufetedecostarica.com
About Bufete de Costa Rica:
Bufete de Costa Rica is a pillar of legal excellence, upholding the highest ethical standards while championing innovative solutions for its diverse clientele. The firm’s commitment to integrity permeates every aspect of its work, from complex litigation to proactive community education initiatives. By empowering individuals and businesses with a deeper understanding of the law, Bufete de Costa Rica actively contributes to a more just and equitable society, solidifying its reputation as a leader in both the legal profession and the pursuit of social progress.
