Costa Rica financial services sector ends 2016 on strong footing

Wednesday, February 15, 2017

Costa Rica's central bank reported 5.3% annual growth in the financial and insurance services sector in December, as part of its breakdown of monthly economic activity indices (IMAE) for the nation, which indicated overall growth of 4.1% compared to December 2015.

Removing activity in Costa Rica's free-trade zones, the general proxy for GDP growth showed only 3.7% year-on-year growth, compared to 2.3% IMAE in December 2015.

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Weighted as 5.4% of the composite total activity in December report, the finance and insurance sector actually saw lower growth in the final month of 2016 than in December the prior year, which presented a 7.7% IMAE.

"The slowdown is explained by lower growth in credit set in foreign currency, in demand saving deposits and in current account balances," reads the central bank report. "Though to a lesser degree, there was influence from lower growth in commissions received from depositing entities, particularly with commercial banks in relation to credit-card use."

The 4.1% year-on-year uptick for overall IMAE in December was unchanged from the previous year. Notably, manufacturing saw a December 4.4% IMAE, up from 4.0% the year before, while construction activities demonstrated a remarkable turnaround, reaching 9.3% in the month after seeing a -5.7% IMAE in December 2015.

Central bank data on construction indicated that IMAE remained in negative territory through most of 2016, only rising to positive levels in October, November and December.

The report also cited strong agribusiness activity in 2016, achieving a 5.2% IMAE in December.

In a report from local news outlet La Nación, economist Alberto Franco of Econanálisis said, "Activity in some farm goods like pineapple and banana had an important recovery," however, the data indicated a weakening trend in the sector after building to an annual 5.9% high in October.

Overall services, representing more than half of the total IMAE by weight, were supportive of economic growth in Costa Rica last year, where, according to Franco, financial intermediation, professional services, information services and tourism played a key role.