Costa Rica: Stronger and more inclusive growth will require new reforms | WPN World People News

Costa Rica has made impressive economic, social and environmental progress, but further institutional and policy reforms will be necessary to ensure stronger and more inclusive growth, according to the first-ever OECD Economic Assessment of Costa Rica.

The Assessment, presented in San José Monday by OECD Secretary-General Angel Gurría and Costa Rican President Luis Guillermo Solís, underlines the country’s success in attracting foreign direct investment, boosting living standards and improving well-being over the past 30 years, but also points out serious challenges that have emerged, particularly as concerns public finances.

“The Costa Rican economy is gradually recovering from the global economic crisis, and is now expected to grow faster than most of the other countries in Latin America, as well as most of those in the OECD,” Mr Gurría said.

“While growth is projected to remain strong over the coming two years, at about 4% annually, budgetary pressures are becoming more persistent. Putting the house in order will require raising more tax revenues, restraining public spending while improving its efficiency and ensuring that public finances are managed in an effective manner.”

The OECD Economic Assessment of Costa Rica feeds into the country’s ongoing OECD accession process, which was launched in April 2015. It aims to contribute to the design and implementation of reforms that will help Costa Rica continue modernising while improving living standards for all.

The Assessment suggests that Costa Rica take immediate steps toward the consolidation of public finances, through programmed cuts to the government deficit over the coming three years. Swift implementation of the proposed tax reform, combatting tax evasion, eliminating tax exemptions and curbing growth in public spending will be critical. Introduction of a medium-term fiscal framework, with a clear and verifiable expenditure rule, is also recommended.

To ensure continuing advances in income and living standards, the Assessment calls for new reforms to boost productivity growth. The main priority is to improve competition policy and governance of state-owned enterprises. Productivity would also be enhanced by promoting innovation, better access to finance and transport infrastructure.

Reforms for bringing about a stronger economy go hand-in-hand with efforts to make Costa Rica a more inclusive society, notably for informal workers and women, according to the Assessment. Improving the quality of education and enhancing the effectiveness of cash transfers in reducing poverty would expand opportunities and share prosperity more widely.

The report was presented in San José in the context of the official visit that the OECD Secretary-General is making to advance Costa Rica’s accession process to the Organisation, including meetings with President Solís and several ministers, as well as members of the parliament, the business community, trade unions and civil society.

Source: Organization for Economic Co-operation and Development