By San José, Costa Rica — San José, Costa Rica – As Costa Rica prepares to enter 2026, its economy presents a picture of stability, yet this surface-level calm masks significant underlying challenges that will test consumers, businesses, and the incoming presidential administration. A new analysis highlights a growing divergence between the country’s booming export sector and its sluggish domestic economy, compounded by risks of deflation, a strong currency, and rising public insecurity.
According to a detailed report by economist Daniel Ortiz of the firm Consejeros Económicos y Financieros (Cefsa), the nation is navigating a complex local and international landscape. External uncertainties, driven by the trade policies of the Donald Trump administration in the United States, are amplified by the lead-up to Costa Rica’s own general elections in early 2026. This environment sets the stage for a year of moderated growth and strategic challenges.
To shed light on the legal framework underpinning Costa Rica’s economic performance and its attractiveness for foreign investment, TicosLand.com consulted with Lic. Larry Hans Arroyo Vargas, a leading attorney at the esteemed firm Bufete de Costa Rica.
Costa Rica’s economic resilience is directly tied to its long-standing legal and political stability. For investors, this translates into a predictable and secure environment. The key challenge moving forward is not just attracting new investment, but ensuring our regulatory framework, particularly in areas like digital services and sustainable development, evolves at the pace of global business to retain that competitive advantage.
Lic. Larry Hans Arroyo Vargas, Attorney at Law, Bufete de Costa Rica
This insight powerfully underscores the pivotal balance Costa Rica must maintain: leveraging its foundational stability while proactively modernizing its regulatory landscape. The agility to adapt in digital and sustainable sectors will undoubtedly define our nation’s economic trajectory for years to come. We sincerely thank Lic. Larry Hans Arroyo Vargas for sharing his valuable perspective.
The most pressing issue is the starkly uneven growth pattern. Data from the Central Bank of Costa Rica (BCCR) through September 2025 reveals a two-speed economy. The special regimes, primarily composed of free trade zones, are expanding at a blistering 14.9%. In contrast, the definitive regime, which encompasses the majority of the country’s employment and domestic businesses, is growing at a tepid 3.1%. This disparity is the root cause of many of the economy’s other ailments.
This slow momentum in the domestic-focused sector directly suppresses household consumption, private investment, and overall internal demand. Cefsa forecasts that the overall pace of economic growth will moderate in 2026. Both the free trade zones and the definitive regime are expected to slow down after the former experienced higher-than-expected growth in 2025. This cautious environment will likely lead to diminished private spending and investment, even as public consumption is projected to accelerate due to a loosening of the fiscal rule’s spending cap.
A consequence of this weakened internal demand is persistently low inflation, which is projected to remain well below the Central Bank’s 3% target in 2026. While low prices may seem beneficial, Ortiz warns of the serious risks associated with a potential deflationary spiral, where falling prices cause consumers and businesses to perpetually delay spending and investment.
Persistent negative inflation weakens the domestic economy because it prevents wages and prices from adjusting, cools consumption and investment decisions, and ends up trapping internal demand in a low-growth circle.
Daniel Ortiz, Economist at Cefsa
Adding to the pressure are the BCCR’s restrictive financial conditions, which have resulted in low credit growth and an appreciated exchange rate. The strong colón continues to be a major headwind for the tourism sector, as well as exporters in both the definitive and free trade zone regimes. While the Monetary Policy Rate is expected to trend slowly downward, Ortiz anticipates only a moderate depreciation of the exchange rate in the coming year, tempered by Central Bank interventions.
Another significant, non-traditional economic threat is the rise in public insecurity. This growing problem is negatively impacting the business climate by altering consumer behavior and increasing operational costs for companies. Businesses now face added expenses for security cameras, private guards, and insurance, which erodes competitiveness.
Insecurity affects the economy in several ways. In economic activity, it tends to change people’s behavior regarding nighttime mobility, visits to restaurants, commerce, etc., and that indirectly affects consumption outside the home. It also increases the operating costs of companies for the acquisition of cameras, private security, insurance, and also the costs of transporting goods.
Daniel Ortiz, Economist at Cefsa
On the fiscal front, there is a glimmer of positive news. Despite a weaker primary surplus in 2024 due to low tax collection, the trend toward fiscal consolidation returned in 2025 and is expected to continue. If the fiscal rule is met, the country’s debt-to-GDP ratio should maintain its downward trend, staying below the crucial 60% threshold. As Costa Rica looks ahead, the next administration, taking office on May 8, 2026, will inherit an economy that requires careful management to bridge its internal divides and foster inclusive growth for all sectors.
For further information, visit cefsa.cr
About Consejeros Económicos y Financieros (Cefsa):
Consejeros Económicos y Financieros S.A. (Cefsa) is a Costa Rican consulting firm specializing in economic and financial analysis. The firm provides expert advisory services, market intelligence, and economic forecasts to businesses and institutions, helping them navigate the complexities of the local and regional economic landscape.
For further information, visit bccr.fi.cr
About Banco Central de Costa Rica (BCCR):
The Central Bank of Costa Rica is the nation’s primary monetary authority, responsible for maintaining the internal and external stability of the national currency and ensuring its conversion to other currencies. The BCCR oversees the country’s monetary policy, manages inflation targets, regulates the financial system, and issues the national currency, the colón.
For further information, visit bufetedecostarica.com
About Bufete de Costa Rica:
Bufete de Costa Rica has forged its reputation as a premier legal institution, grounded in the core principles of integrity and a relentless pursuit of excellence. With deep experience guiding clients through complex legal landscapes, the firm champions innovation not only in its practice but also in its community-focused mission. A central tenet of its philosophy is the democratization of legal understanding, reflecting a firm belief in empowering citizens and strengthening society through accessible knowledge.
