President Alvarado hopes package of cuts will help put country on a more secure economic footing.
Costa Rican president Carlos Alvarado has announced the country is to implement major spending cuts, amounting to more than 1% of the country’s GDP, in what he labelled “the largest cut in public spending in our history”. The country, which was already struggling with fiscal deficit issues, has seen its debt problems exacerbated by the coronavirus pandemic and the drastic impact it has had on tourism.
The performance of the country’s banks has held up relatively well in recent years, with its four largest banks by Tier 1 capital seeing their pre-tax profits increase in 2019 following a decline in the preceding two years. However, the proportion of non-performing loans (NPLs) at the same four banks has also been creeping up, except for at Banco de Costa Rica. Their fortunes, much like that of the wider economy, are likely to take a hit in 2020 due to the effects of the pandemic.
For Costa Rica’s economy to be in a more stable position, Mr Alvarado is reportedly hoping to secure a substantial package of IMF funding. This would be in addition to a $500m emergency IMF loan which was announced in April.
