Forecast
Apr 23rd 2008 From the Econom ist Intelligence Unit Source: Country Fore cast
Outlook for 2008-09 The government will focus on passing the laws required to bring the Dominican Republic -Central American Free-Trade Agreement (DR-CAFTA) into effec t and is confident this can be done before the October deadline. Negotiations will continue with other Central American countries to form a Central American customs union, which will then seek a free-trade agreement (FTA) with the EU. Talks with the EU have already started. A long-awaited fiscal reform will be a priority in the second half of 2008 and although the Economist Intelligence Unit expects it to be passed, there is a significant risk that it will not, or that it will be diluted. We are now assuming that the US will go into recession in the first half of 2008, which will have a strong impact on the Costa Rican economy: the US typically accounts for 35-40% of Costa Rican exports. Given the US recession, we forecast a dip in growth in 2008, to 3.5 %, with export growth turning negative and import growth also falling. Manufacturing will be the worst -affected productive sector.