Costa Rica President Luis Guillermo Solis, in his first speech to the nation after being sworn in, said the Central American country’s fiscal deficit threatens the economy and should be resolved within two years.
“We need to be able to resolve the deficit within the next two years, maximum, as it is perhaps the biggest challenge we face,” Solis, 56, told a crowd of cheering supporters at the national stadium in San Jose today after receiving the presidential sash from outgoing President Laura Chinchilla.
Solis will also seek to reassure investors about the country’s business climate after Intel Corp. and Bank of America Corp. announced plans to cut about 3,000 jobs this year, saying they wanted to consolidate operations elsewhere. The $45 billion economy’s budget deficit is forecast to widen to 6 percent of gross domestic product this year from 5.4 percent in 2013.
Costa’s Rica’s economy expanded 3.1 percent last year, more than the 2.4 percent average for 10 Latin American nations tracked by Bloomberg. Incoming central bank President Olivier Castro, who will be sworn in tomorrow, said in an April 22 interview that he expects the economy to expand 5 percent in 2015, more than double the 2.2 percent outlook by Citigroup Inc., which cut its forecast after the Intel and BofA firings.
The country of 4.7 million people climbed seven spots to 102nd in the World Bank’s annual “Doing Business” report this year, lagging behind China, Vietnam and Namibia. Moody’s Investors Service lowered its outlook on Costa Rica to negative from neutral in September, citing a rising debt burden and widening budget deficit. Moody’s rates the country Baa3, putting it in the same category as Turkey and Iceland.
As president, Solis will have to work with a fragmented Congress, with Chinchilla’s National Liberation party holding 18 seats compared with 13 for his Citizen’s Action party. The Broad Front party won nine seats and the Social Christian Union won eight.