According to the first-ever published OECD Economic Assessment of Costa Rica, despite significant social, environmental, and economic progress, the Latin American country is still in need of further reforms to ensure long-term growth.
In the last few years, the country has had tremendous success in boosting living standards, attracting foreign direct investment, and improving the well being of residents. Even so, serious challenges remain, particularly in regard to public finances. The economy in Costa Rica is recovering gradually from the economic crisis that swept the world a few years ago, and is now expected to grow at a rate faster than that of other countries in Latin America. Over the next two years, growth is expected to remain quite strong, however budget issues have become a serious concern. In order to address those issues, it will be necessary to increase tax revenues while also putting a lid on public spending. Additionally, the government will need to improve efficiency while also making sure public finances are managed effectively.
The OECD Economic Assessment supports the country’s continuing OECD Accession process, and was first launched last year. The goal of the assessment is to further support the design and implementation of reforms intended to assist the country in modernizing living standards.
The Assessment recommends immediate steps being taking toward consolidating public finances. Suggested steps include proposed tax reform, the elimination of tax exemptions, combatting tax evasion, and slashing growth in public spending. Additionally, a medium-term fiscal framework is recommended.
In order to ensure continuing progress in living and income standards, the report also calls for new reforms to increase the growth of productivity. The main goal of the Assessment is to improve the governance of state-owned enterprises, as well as competition policy. By promoting innovation along with improved access to transport and finance infrastructure, it is hoped that productivity will be enhanced.
Costa Rica has also established a goal of developing a more inclusive society, particularly for women and informal workers. With more effective cash transfers, the country has managed to reduce poverty and is working toward improving the quality of education and expanding economic opportunities, with the goal of sharing prosperity on a wider basis.
The Assessment was presented as part of an official visit in San Jose by the OECD Secretary-General, which also included meetings with several ministers, as well as President Solis.