Macroeconomic Forecast Costa Rica

BMI View: Foreign reserves (excluding gold) ballooned to US$4.1bn in 2007, an increase of 32% from the previous year. The rapid accumulation of international reserves is reflective of a robust capital and financial account performance last year, as foreign direct investment flows remained robust despite credit concerns in the US. For 2008, we expect the pace of reserves build up to soften, and forecast a year-end total of US$4.3bn. That said, risks are to the upside - especially if the central bank decides to intervene yet more heavily in the forex market to keep the currency along its path of crawling depreciation.

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