A Gloomier Economic Outlook

BMI View: Costa Rica is falling into a stagflationary trap. Rapid monetary supply growth - coupled with deeply negative real interest rates - has stoked non-tradable inflation, and the authorities have so far failed to take the necessary tightening measures to absorb these pressures. Meanwhile, economic activity has started to decelerate sharply, as high operational costs and plummeting consumer confidence start to take their toll. As such, we are taking a more bearish outlook towards growth and inflation for this year and next.

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