Costa Rica’s 2026 Growth Forecast Trimmed by World Bank

The World Bank lowered its 2026 growth forecast for Costa Rica to 3.5%, a modest downgrade that places the country in line with other major economic projections but confirms that the economy is moving into a slower phase after a stronger performance last year. The new figure appears in the June 2026 edition of the World Bank’s Global Economic Prospects report. In January, the institution had projected Costa Rica’s economy would grow 3.6% this year. The updated forecast cuts that estimate by one-tenth of a percentage point. The downgrade is small, but the broader setting is not. The World Bank now expects global growth to slow to 2.5% in 2026, the weakest pace since the start of the COVID-19 pandemic. The revision is tied to the conflict in the Middle East, which has pushed energy prices higher, added pressure to global inflation and increased borrowing costs. The report says forecasts for two-thirds of the world’s economies have been downgraded since January. Global growth is expected to improve to 2.8% in 2027, but still remain below the average pace recorded during the 2010s. Costa Rica is not being hit as sharply as many other economies. The World Bank projects Latin America and the Caribbean as a whole will grow 2.2% in 2026 before improving to 2.5% in 2027. Costa Rica’s 3.5% forecast remains above the regional average and among the stronger projections in Central America. The World Bank’s latest table places Costa Rica’s real GDP growth at 4.6% in 2025, followed by 3.5% in 2026, 3.6% in 2027 and 3.7% in 2028. That points to cooling growth rather than a contraction. The same reading is coming from Costa Rica’s Central Bank. In its April Monetary Policy Report, the BCCR projected economic growth of 3.5% in 2026 and 3.6% in 2027. That was also a downward revision from its January estimate, mainly because of weaker external conditions and the expected effect of higher international energy prices. The OECD has a similar view. Its latest Costa Rica outlook projects GDP growth of 3.5% in 2026 and 3.4% in 2027, with domestic demand remaining relatively firm but external demand weakening as the global economy slows. For Costa Rica the economy is still expanding at a pace many countries in the region would welcome, but the momentum is less favorable than it was a year ago. Growth in 2025 was supported by exports, especially medical devices and services, two areas that remain central to Costa Rica’s economic performance. The World Bank notes that Costa Rica’s unemployment rate fell to 6.3% in the quarter ending in December 2025, supported by last year’s stronger activity. That improvement gives us some cushion, although the labor market still faces deeper challenges, including lower participation and uneven access to better-paying jobs outside the most dynamic sectors. Inflation is another key part of the outlook. Costa Rica has gone through a period of unusually low inflation and even deflation, helped by lower fuel prices and the strength of the colón. The World Bank expects inflation to rebound to an average of 1.0% in 2026, still below the Central Bank’s target range of 2% to 4%. That could change if international oil prices stay high for longer than expected. The BCCR has already warned that a sharper rise in fuel prices would mean slower growth and higher inflation. Its alternative scenario shows that more severe energy pressure could shave additional points off Costa Rica’s output while pushing prices higher. The Central Bank has also flagged climate-related supply shocks as a risk, including the possible effect of extreme weather on food prices. That matters heading into 2027, especially for households already sensitive to increases in basic goods. At the end of it all, the basic premise is that Costa Rica’s economy is slowing, not stalling. A 3.5% expansion still suggests job creation, consumer activity and investment, but with less room for surprises. Higher fuel costs, weaker global demand and tighter financial conditions abroad could affect import prices, airfares, tourism flows, credit conditions and household budgets. The strong colón remains a separate pressure point. It has helped hold down the cost of imported goods and fuel in local currency terms, but it has also made Costa Rica more expensive for many foreign visitors and has weighed on exporters paid in dollars. That tension is likely to remain part of the economic debate through the rest of the year. Costa Rica enters this slower period with advantages: a high-value export base, a growing medical device sector, stable institutions and continued foreign investment. But the latest World Bank forecast makes clear that the country is not insulated from external shocks. The new projection is not a warning of recession. It is a warning that Costa Rica’s post-pandemic growth surge is easing, and that the next phase will depend heavily on how long global energy pressure lasts, how foreign demand holds up and how effectively the country manages inflation, public finances and investment. The post Costa Rica’s 2026 Growth Forecast Trimmed by World Bank appeared first on The Tico Times | Costa Rica News | Travel | Real Estate.