Inflation in Costa Rica

A short history of inflation in Costa Rica

The Debt Crisis (1981 to 1983)

Costa Rican inflation peaked at 108.8% in the year to September 1982, the country's share of the Latin American debt crisis. Costa Rica had borrowed heavily through the 1970s and suspended payments on its foreign debt in 1981; the colon, previously fixed, lost most of its value, and for an economy importing its fuel and much of its food that fed directly into prices.

Stabilisation and Targeting (1983 onwards)

Stabilisation came with debt restructuring and support from the International Monetary Fund, and inflation settled into the low double figures for the following two decades rather than returning to crisis. The Banco Central de Costa Rica adopted a formal inflation target in 2018, having managed the exchange rate for most of its history.

Post-Covid Inflation (2021 to 2023)

In Costa Rica, prices rose fastest in August 2022, at 12.1%. The causes of the post-Covid inflation were global in nature, beginning with the lockdowns: factories and ports closed and the shipping between them fell out of sequence, so goods took longer to make and longer to arrive. Governments had spent heavily supporting household incomes through those closures, so when restrictions lifted there was money waiting to be spent and not enough on the shelves to spend it on. Then in February 2022 Russia invaded Ukraine, disrupting two of the world's largest suppliers of wheat, fertiliser, oil and gas at once, and the cost of everything grown, heated or transported rose with them.

Because the causes were shared, so was the timing: most countries peaked within a few months of one another in late 2022. The major inflation events covers this episode and the others in more detail.