Costa Rica News – The Organization for economic Cooperation and Development, OECD, has warned Costa Rica of possible capital outflow attributed to external turbulence. There will likely be financial effects along with the normalization of the monetary policy of international economies.
The agency explains that financial turmoil is created when the international markets make corrections in their interest rates. The normalization of monetary policy can trigger capital outflows leading to depreciation of the currency.
This can further weaken Costa Rica’s fiscal position. Additionally, the country’s banking sector is very much dollarized and there are dollar-denominated loans extended to unsecured borrowers.
There are issues involved both nationally and internationally. For example, interest rates were reduced after the global crisis of 2008 but are now normalizing to their normal rates in many countries. Another example is that Costa Rica faces high public debt and deficit as well as uncertainty about a possible tax reform. Because of these reasons, the OECD urges Costa Rica to avoid escalation in trade tensions.
