The service industry in Costa Rica expands
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According to updated information provided by the country’s Central Bank, the service industry in Costa Rica accounted for 44.5% of domestic economic output in 2017. This is more than four percentage points above the number that was recorded in 2012.
In January of 2021, the Central Bank of Costa Rica (BCCR) updated its calculation of the country’s Gross Domestic Product (GDP).
The information presented in the BCCR’s report demonstrates that the service industry in Costa Rica has gained ground as a component of the nation’s economic output over virtually all other sectors. This is with the exception of the financial services and insurance industries which recorded a 6.1% contribution increase to Cosa Rica’s GDP in 2017.
The service industry in Costa Rica includes activities such as transportation, storage, communications, services provided to companies, hotels, and financial and insurance intermediation, among others.
Rodrigo Cubero, president of the Central Bank of Costa Rica (BCCR), recently explained that the Costa Rican economy has followed a course towards services in its development process.
“When economies get richer and more sophisticated, the weight of service sector usually increases. In Costa Rica, this part of the economy has grown vigorously. This is especially true in the tourism sector, with hotels, transport, and entertainment services leading the way,” explained Cubero.
The director of the BCCR also stressed that the business support sector has also shown a significant increase among the service industries in Costa Rica. This growth has been evidenced in the areas of software production and the digital economy as a whole.
During the period under consideration, it was the manufacturing industries that lost the most ground in the composition of the country’s GDP production.
In 2012, companies in this sector contributed 15.1% to overall Gross Domestic Product but now account for 13%, according to the BCCR’s new calculation.
Gross Domestic Product (GDP) is the total value of goods and services produced within the country. To measure this, the amount of goods and services generated is multiplied by their price and the structure is used in the context of the production of a base year.
As part of the update of national accounts, the Central Bank changed the base year from 2012 to 2017, resulting in a change in the composition of contribution to Costa Rica’s Gross Domestic Product.
According to the results, the published GDP figure for 2017 was ¢33.18 trillion and now rises to ¢34.34 trillion. This represents an upward revision of the GDP value of 3.5 percentage points.
On the other hand, the chairman of the Central Bank explained that the new revision of GDP figures will have a minor impact on macroeconomic variables.
He stressed that related measures such as the fiscal deficit or the calculation of the fiscal rule, for the Central Government, would not visibly change.
“Variables that are defined as a percentage of GDP, such as public debt may fall a bit, or other fiscal variables such as collection or spending as a percentage of production may do the same. All of these would fall with this new GDP calculation.”
Cubero emphasized that the re-calculation of Gross Domestic Product will not affect the country’s ongoing negotiations with the International Monetary Fund (IMF).
The BCCR carried out a special review of the relevance of the country’s production link to global value chains.
The analysis showed that 8.6% of production in 2017 was generated as a result of the country’s connection to international markets.
The main component was the service industry in Costa Rica which accounted for 5.4% of GDP, while goods were 3.2% of production, according to the issuing body’s estimate.
Global value chains are the production processes that are carried out in more than two countries.
Global value chain-related economic activities accounted for nearly 50% of Costa Rica’s exports in 2017 and contributed 5.3% to national employment, explained Henry Vargas, director of the BCCR’s Macroeconomic Statistics Department.
Central Bank information shows that, in free zone service companies, 42.5% of the capital to generate production was from US investments, followed by 16.7% from the Netherlands, and 9.8% was of Costa Rican origin.
A similar situation occurred in the case of manufacturing companies.
47.4% of the money to generate the production of goods in the country was from the US in its origin, 10.2% came from the Netherlands, and 9.6% from Panama, according to the BCCR analysis.
The most common final destination of the product was, in both services and manufacturing, the United States.
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