Sharing the benefits of growth more widely Costa Rica 2018 OECD Economic Survey

1. OECD ECONOMIC SURVEY
COSTA RICA 2018
San José, 17 April 2018
@OECD
@OECDeconomy
www.oecd.org/eco/surveys/economic-survey-costa-rica.htm
Sharing the benefits of growth more widely

2. 2
Living standards are rising
Source: OECD Productivity Database.

3. 3
Costa Rica’s social achievements are
impressive: Education
Note: LAC refers to Latin America and the Caribbean. OECD is a simple average of 32 OECD member
countries with available data.
Source: UNESCO Statistics.
88
90
92
94
96
98
88
90
92
94
96
98
COL LAC CHL MEX CRI OECD
%%
Primary education net enrolment rate
2016 or latest available year

4. 4
Costa Rica’s social achievements are
impressive: Life expectancy
Note: LAC refers to Latin America and the Caribbean.
Source: OECD Health Statistics database and World Bank World Development Indicators.
70
72
74
76
78
80
82
70
72
74
76
78
80
82
COL MEX LAC CHL CRI OECD
Life expectancy at birth (years)
2016 or latest available year

5. 5
Costa Rica’s social achievements are
impressive: Absolute Poverty Rate
Note: LAC refers to Latin America and the Caribbean. Absolute poverty rate is based on an international poverty
line of 2011 PPP $1.90 a day.
Source: World Bank World Development Indicators.
0
1
2
3
4
5
6
0
1
2
3
4
5
6
CHL CRI MEX LAC COL
%% Absolute poverty rate
2015 or latest available year

6. 6
Costa Rica’s social achievements are
impressive: Life Satisfaction
Note: The OECD average is population weighted and excludes Iceland and Luxembourg.
Source: OECD calculations based on Gallup World Poll, www.gallup.com/services/170945/world-poll.aspx.
5.8
6.0
6.2
6.4
6.6
6.8
7.0
7.2
5.8
6.0
6.2
6.4
6.6
6.8
7.0
7.2
COL OECD MEX CHL CRI
Life satisfaction
Mean values on a 0-10 scale, 2014-2016

7. However, inequality is high and has
increased
7
0
2
4
6
8
10
12
14
0
2
4
6
8
10
12
14
CZE SVK SVN HUN POL PRT LVA GRC MEX CRI
Income distribution, S80/S20
Note: The S80/S20 ratio represents the share of all income received by the top quintile divided by the share
of the first. Data refer to 2015 except for Hungary (2014), Mexico (2014) and Costa Rica (2016).
Source: OECD Income Distribution Database.

8. Employment rates are low
8
55
60
65
70
55
60
65
70
2000 2002 2004 2006 2008 2010 2012 2014 2016
% of total working-age population
OECD CRI LAC-4
% %
Note: LAC-4 refers to Brazil, Chile, Colombia and Mexico.
Source: OECD Labour Force Statistics database.

9. Unemployment remains high
9
0
2
4
6
8
10
12
0
2
4
6
8
10
12
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
% of labour force % of labour forceUnemployment rate
Source: OECD Labour Force Statistics database.

10. Unemployment affects primarily the
young and low skilled
10
0
5
10
15
20
25
0
5
10
15
20
25
Women 15-24 25-34 Less than
primary
education
Less than
secondary
education
Less than
tertiary
education
% of labour force% of labour force
Unemployment by worker characteristics
(for groups with high unemployment rates), 2017
Source: INEC, Encuesta Continua de Empleo.

11. 11
Labour productivity is low
Source: OECD Productivity Database.
0
10
20
30
40
50
60
70
80
90
0
10
20
30
40
50
60
70
80
90
CRI
MEX
CHL
LVA
POL
EST
GRC
HUN
PRT
KOR
CZE
ISR
TUR
SVN
NZL
SVK
JAP
ISL
OECD
ESP
ITA
GBR
CAN
FIN
AUS
AUT
SWE
CHE
DEU
FRA
NLD
USA
DNK
BEL
NOR
LUX
IRL
USDUSD
GDP per hour worked, 2016

12. 12
Labour utilisation is high due to long
working hours
Source: OECD Productivity Database.
1300
1400
1500
1600
1700
1800
1900
2000
2100
2200
2300
1300
1400
1500
1600
1700
1800
1900
2000
2100
2200
2300
DEU
DNK
NOR
NLD
FRA
LUX
BEL
CHE
AUT
SWE
FIN
SVN
GBR
ESP
CAN
JAP
ITA
AUS
IRL
SVK
USA
OECD
NZL
HUN
CZE
TUR
EST
PRT
ISL
LVA
ISR
CHL
GRC
POL
KOR
MEX
CRI
HrsHrs
Hours worked per person employed, 2016

13. 13
Achieving Fiscal Sustainability

14. 14
Fiscal performance continues to
deteriorate
-8
-6
-4
-2
0
2
4
6
8
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
-8
-6
-4
-2
0
2
4
6
8
% of GDP% of GDP
Budget balance Primary balance
Note: Data refer to the central government only.
Source: Ministerio de Hacienda.

15. 15
Public debt is growing rapidly
0
10
20
30
40
50
60
0
10
20
30
40
50
60
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
% of GDP% of GDP
Central government gross debt
Source: Ministerio de Hacienda.

16. 16
Public debt is high relative to tax
revenues
0
50
100
150
200
250
300
350
400
0
50
100
150
200
250
300
350
400
EST CHL CZE TUR LVA PRY NIC SVK PER POLARGHUNHNDPAN COL SVNURYGTMBRAMEXPRT CRI SLV GRC
Public debt stock
% of total revenues, 2016
Note: Data refer to central government.
Source: IMF World Economic Outlook Database.

17. 17
Spending keeps outpacing revenues
10
15
20
25
10
15
20
25
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
% of GDP% of GDP
Total revenues Total expenditure
Source: Ministerio de Hacienda.

18. 18
Debt will soar without urgent measures
Source: OECD calculations based on data from Ministerio de Hacienda.
0
10
20
30
40
50
60
70
80
90
100
0
10
20
30
40
50
60
70
80
90
100
2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032
% of GDP% of GDP
A. No Consolidation
B. Reform to strengthen public finances
C. 3% fiscal adjustment

19. 19
Public employment is low
0
5
10
15
20
25
30
35
0
5
10
15
20
25
30
35
Public employment
2016 or latest available year
% of employment % of employment
Source: ILOSTAT.

20. 20
The public sector wage bill is high
0
10
20
30
40
50
60
0
10
20
30
40
50
60
COL CZE HUN TUR SVK GRC PEER PRT SVN POL LVA EST CHL BRA HND SLV CRI
Compensation of government employees
2016 or latest available year
% of total
revenues
% of total
revenues
Source: IMF Government Finance Statistics database.

21. 21
Tax revenues can be further
increased
10
15
20
25
30
35
40
10
15
20
25
30
35
40
1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016
% of GDP% of GDP
Total revenues
Costa Rica LAC-5 Central America OECD
Note: LAC-5 is an unweighted average of: Argentina, Brazil, Chile, Colombia and Mexico. Central America is
an unweighted average of Belize, Guatemala, Honduras, Nicaragua, Panama, El Salvador.
Source: OECD Revenue Statistics; OECD/IDB/CIAT Revenue Statistics in Latin America (2018).

22. 22
Income and profit tax revenues are low
0
2
4
6
8
10
12
0
2
4
6
8
10
12
CRI COL CHL BRA MEX PEER OECD
% of GDP% of GDP
Income and profit taxes, 2016
Note: PEER is an unweighted average of the 10 non-Latin American OECD countries with the lowest GDP
per capita and available information. OECD is an unweighted average of 2015 data.
Source: OECD Revenue Statistics; OECD/IDB/CIAT Revenue Statistics in Latin America (2018).

23. 23
VAT tax collection is low
0
2
4
6
8
10
12
0
2
4
6
8
10
12
MEX CRI COL OECD BRA PEER CHL
% of GDP% of GDP
Value added taxes, 2016
Note: PEER is an unweighted average of the 10 non-Latin American OECD countries with the lowest GDP
per capita and available information. OECD is an unweighted average of 2015 data.
Source: OECD Revenue Statistics; OECD/IDB/CIAT Revenue Statistics in Latin America (2018).

24. 24
Recommendations to restore fiscal
sustainability
• Implement immediate measures to reduce the budget deficit by 3 percentage points of
GDP during 2018-20 to stabilise the debt-to-GDP ratio, through a comprehensive
package of measures to:
- raise revenue,
- curb spending,
- strengthen the fiscal rule.
• Reduce budget rigidities stemming from legally mandated spending and earmarking of
government revenues.
• In the medium term take actions to reduce the debt-to-GDP ratio to prudent levels
while building fiscal space to address contingencies.
• Streamline public sector employment to better control payroll costs.
• Assess contingent liabilities.
• Create a fiscal council and introduce a multi-year expenditure framework.
• Modernise debt management by reducing the number of benchmark securities and
improving communication with markets.

25. 25
Fostering competition

26. FDI restrictions are relatively low overall
26
0.00
0.05
0.10
0.15
0.20
0.00
0.05
0.10
0.15
0.20
FDI Regulatory Restrictiveness Index, 2016
(0-1 from open to closed)
Note: LAC-5 is a simple average of Argentina, Brazil, Colombia, Chile and Mexico.
Source: OECD FDI Restrictiveness Index.

27. Services trade restrictions are high
27
0
0.1
0.2
0.3
0.4
0
0.1
0.2
0.3
0.4
A. Overall STRI 2017
Scale 0-1 from least to most restrictive
Note: LAC-4 refers to a simple average of Brazil, Chile, Colombia and Mexico.
Source: OECD Services Trade Restrictiveness Index (STRI).

28. Regulations are stringent
28
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
OECD Product Market Regulation Indicator
(higher=more stringent)
Note: LAC-5 is a simple average of Argentina, Brazil, Chile, Colombia and Mexico. PEER is a simple
average of the 10 OECD lowest GDP per capital countries excluding Latin American countries.
Source: OECD-WBG Product Market Regulation database for all LAC countries except Brazil, Chile and
Mexico; OECD Product Market Regulation database.

29. State controls restrict competition
29
Note: LAC-5 is a simple average of Argentina, Brazil, Chile, Colombia and Mexico.
Source: OECD-WBG Product Market Regulation database for all LAC countries except
Brazil, Chile and Mexico; OECD Product Market Regulation database.
0 1 2 3 4 5 6
State control (Overall)
Scope of state-owned enterprises
Government involvement in network sectors
Direct control over business enterprises
Governance of state-owned enterprises
Price controls
Command & control regulation
Level of PMR score
Costa
Rica
LAC-5
OECD

30. Barriers to entrepreneurship are high
30
Note: LAC-5 is a simple average of Argentina, Brazil, Chile, Colombia and Mexico.
Source: OECD-WBG Product Market Regulation database for all LAC countries except
Brazil, Chile and Mexico; OECD Product Market Regulation database.
0 1 2 3 4 5 6
Barriers to entrepreneurship (Overall)
Licence and permits system
Communication and simplification of rules and procedures
Administrative burdens for corporations
Administrative burdens for sole proprietor firms
Barriers in services sectors
Legal barriers to entry
Antitrust exemptions
Barriers in network sectors
Level of PMR score
Costa Rica
LAC-5
OECD

31. The insolvency process is lengthy and the debt
recovery rate is low
31
0
10
20
30
40
50
60
70
80
90
100
0
10
20
30
40
50
60
70
80
90
100
World Bank Doing Business: Resolving insolvency, 2017
Distance to the frontier (100=best practice)
Source: : World Bank Doing Business 2018 database.

32. • Adopt and implement the bill reinforcing the powers, independence
and funding of the competition commission.
• Continue implementation of the action plan to increase consistency
with the OECD Guidelines on Corporate Governance of State-
Owned Enterprises.
• Continue with the planned 25 sector studies evaluating the
exemption from competition and eliminate unjustified exemptions.
• Establish a one-stop-shop for business registration and licensing.
Introduce performance targets. Continue to improve the insolvency
regime and trade facilitation.
32
Recommendations to foster
competition

33. 33
Making labour markets more
inclusive

34. Informality remains stubbornly high
34
25
30
35
40
45
50
25
30
35
40
45
50
III IV I II III IV I II III IV I II III IV I II III IV I II III IV I II III IV I II III IV
2010 2011 2012 2013 2014 2015 2016 2017
%% Share of workers with informal jobs
Source: INEC Encuesta Continua de Empleo.

35. 35
Informality is widespread
0
10
20
30
40
50
60
70
80
90
100
0
10
20
30
40
50
60
70
80
90
100
Women Over 60 Less than
primary
education
Less than
secondary
education
Rural Self-employed Part-time Low
income¹
%%
Informality by worker characteristics
(for groups with high informality rates), 2017
1. Low income refers to hourly earnings of less than the lowest minimum wage.
Source: INEC Encuesta Continua de Empleo.

36. The minimum wage is high and complex
and discourages formalisation
36
0
10
20
30
40
50
60
70
80
90
100
0
10
20
30
40
50
60
70
80
90
100
USA
MEX
ESP
CZE
JPN
EST
NLD
IRL
CAN
DEU
SVK
GRC
GBR
BEL
KOR
LVA
HUN
AUS
POL
LUX
ISR
PRT
SVN
FRA
NZL
CHL
CRI
TUR
COL
Minimum wage
as a percentage of the median wages of full-time workers, 2016%
Note: For Costa Rica, the calculations use the minimum wage of unskilled workers.
Source: OECD Labour Force Statistics Database.

37. Recommendations to reduce high
informality
• Implement a comprehensive plan to
reduce informality, including greater
enforcement of obligations to pay
contributions.
• Continue moving to a smaller number of
minimum wages.
37

38. 38
Enhancing education outcomes

39. Education spending is high
39
0
1
2
3
4
5
6
7
8
9
0
1
2
3
4
5
6
7
8
9
CZE
JPN
HUN
SVK
ITA
ESP
CHL
TUR
COL
POL
SVN
LVA
EST
MEX
PRT
LAC-5
KOR
OECD
NLD
NZL
CRI
NOR
% of GDP% of GDP
Public expenditure on education, 2015
2017
Note: Expenditure on primary, secondary, post-secondary and tertiary education. LAC-5 is a simple average
of Argentina, Brazil, Colombia, Chile and Mexico.
Source: OECD Educational Finance Indicators; Ministerio de Hacienda.

40. Education outcomes are low
40
Note: LAC-5 is a simple average of Argentina, Brazil, Colombia, Chile and Mexico.
Source: OECD Programme for International Student Assessment (PISA).
300
350
400
450
500
550
600
300
350
400
450
500
550
600
COL
MEX
CRI
TUR
LAC-5
CHL
SVK
HUN
ITA
LVA
CZE
ESP
OECD
PRT
POL
NOR
NZL
NLD
SVN
KOR
EST
JPN
Student performance in PISA, 2015
Mean of reading, science and mathematics scores

41. Educational inequalities are high
41
0
5
10
15
20
25
30
0
5
10
15
20
25
30
EST
LVA
TUR
ITA
JPN
KOR
MEX
BRA
NLD
GRC
OECD
DOM
POL
ESP
PEER
NZL
COL
PRT
CRI
LAC-5
SVK
URY
CHL
CZE
HUN
PER
ARG
% points% points
Relationship between student performance and socio-economic status
Variation in PISA scores explained by socio-economic status,2015
Note: LAC-5 is a simple average of Argentina, Brazil, Colombia, Chile and Mexico.
Source: OECD (2016): PISA 2015 Results.

42. • Increase the supply of publicly-funded childcare services.
Classify all spending on early-childhood education and
care under the constitutionally-mandated spending on
education.
• Rebalance education spending towards early childhood
and secondary education. Strengthen targeted support
for at-risk students, and teachers’ training.
• Establish better educational outcomes as the main policy
target, instead of a focus on spending, and develop
performance indicators.
42
Recommendations to improve
education outcomes