OECD ECONOMIC SURVEY COSTA RICA 2018 Sharing the benefits of growth more widely San José, 17 April 2018 www.oecd.org/eco/surveys/economic-survey-costa-rica.htm
@OECDeconomy @OECD
Living standards are rising
Source: OECD Productivity Database.
2
Costa Rica’s social achievements are impressive: Education Primary education net enrolment rate 2016 or latest available year
% 98
% 98
96
96
94
94
92
92
90
90
88
88
COL
LAC
CHL
MEX
CRI
OECD
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.
3
Costa Rica’s social achievements are impressive: Life expectancy Life expectancy at birth (years) 2016 or latest available year 82
82
80
80
78
78
76
76
74
74
72
72
70
70
COL
MEX
LAC
CHL
CRI
Note: LAC refers to Latin America and the Caribbean. Source: OECD Health Statistics database and World Bank World Development Indicators.
OECD
4
Costa Rica’s social achievements are impressive: Absolute Poverty Rate Absolute poverty rate 2015 or latest available year
% 6
% 6
5
5
4
4
3
3
2
2
1
1
0
0
CHL
CRI
MEX
LAC
COL
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.
5
Costa Rica’s social achievements are impressive: Life Satisfaction Life satisfaction Mean values on a 0-10 scale, 2014-2016
7.2
7.2
7.0
7.0
6.8
6.8
6.6
6.6
6.4
6.4
6.2
6.2
6.0
6.0
5.8
5.8
COL
OECD
MEX
CHL
CRI
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.
6
However, inequality is high and has increased Income distribution, S80/S20
14
14
12
12
10
10
8
8
6
6
4
4
2
2
0
0
CZE
SVK
SVN
HUN
POL
PRT
LVA
GRC
MEX
CRI
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.
7
Employment rates are low % of total working-age population
%
% 70
70 OECD
CRI
LAC-4
65
65
60
60
55
2000
2002
2004
2006
2008
Note: LAC-4 refers to Brazil, Chile, Colombia and Mexico. Source: OECD Labour Force Statistics database.
2010
2012
2014
2016
55
8
Unemployment remains high % of labour force
Unemployment rate
% of labour force
12
12
10
10
8
8
6
6
4
4
2
2
0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Source: OECD Labour Force Statistics database.
0 9
Unemployment affects primarily the young and low skilled Unemployment by worker characteristics (for groups with high unemployment rates), 2017 % of labour force 25
% of labour force 25
20
20
15
15
10
10
5
5
0
0
Women
15-24
25-34
Source: INEC, Encuesta Continua de Empleo.
Less than primary education
Less than secondary education
Less than tertiary education
10
Labour productivity is low GDP per hour worked, 2016
USD
USD
90
80
80
70
70
60
60
50
50
40
40
30
30
20
20
10
10
0
0
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
90
Source: OECD Productivity Database.
11
Labour utilisation is high due to long working hours Hours worked per person employed, 2016 Hrs
2300
2300
2200
2200
2100
2100
2000
2000
1900
1900
1800
1800
1700
1700
1600
1600
1500
1500
1400
1400
1300
1300
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
Hrs
Source: OECD Productivity Database.
12
Achieving Fiscal Sustainability
13
Fiscal performance continues to deteriorate % of GDP
% of GDP 8 6
8
Budget balance
Primary balance
6
4
4
2
2
0
0
-2
-2
-4
-4
-6
-6
-8
-8
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Note: Data refer to the central government only. Source: Ministerio de Hacienda.
14
Public debt is growing rapidly Central government gross debt
% of GDP
% of GDP
60
60
50
50
40
40
30
30
20
20
10
10
0
0
2008
2009
2010
Source: Ministerio de Hacienda.
2011
2012
2013
2014
2015
2016
2017
15
Public debt is high relative to tax revenues Public debt stock % of total revenues, 2016 400
400
350
350
300
300
250
250
200
200
150
150
100
100
50
50
0
EST CHL CZE TUR LVA PRY NIC SVK PER POL ARGHUNHND PAN COL SVN URYGTMBRA MEX PRT CRI SLV GRC
Note: Data refer to central government. Source: IMF World Economic Outlook Database.
0
16
Spending keeps outpacing revenues Total revenues
% of GDP 25
Total expenditure
% of GDP 25
20
20
15
15
10
10
2006
2007
2008
2009
Source: Ministerio de Hacienda.
2010
2011
2012
2013
2014
2015
2016
2017
17
Debt will soar without urgent measures % of GDP 100 90 80
% of GDP 100
A. No Consolidation B. Reform to strengthen public finances C. 3% fiscal adjustment
90 80
70
70
60
60
50
50
40
40
30
30
20
20
10
10
0
2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032
Source: OECD calculations based on data from Ministerio de Hacienda.
0 18
Public employment is low % of employment
Public employment 2016 or latest available year
% of employment
35
35
30
30
25
25
20
20
15
15
10
10
5
5
0
0
Source: ILOSTAT.
19
The public sector wage bill is high % of total revenues
Compensation of government employees 2016 or latest available year
% of total revenues
60
60
50
50
40
40
30
30
20
20
10
10
0
0
COL CZE HUN TUR SVK GRC PEER PRT SVN POL LVA EST CHL BRA HND SLV CRI Source: IMF Government Finance Statistics database.
20
Tax revenues can be further increased Total revenues % of GDP
Costa Rica
LAC-5
Central America
OECD
% of GDP
40
40
35
35
30
30
25
25
20
20
15
15
10
10
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
2010
2012
2014
2016
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).
21
Income and profit tax revenues are low Income and profit taxes, 2016 % of GDP 12
% of GDP 12
10
10
8
8
6
6
4
4
2
2
0
0
CRI
COL
CHL
BRA
MEX
PEER
OECD
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).
22
VAT tax collection is low Value added taxes, 2016 % of GDP 12
% of GDP 12
10
10
8
8
6
6
4
4
2
2
0
0
MEX
CRI
COL
OECD
BRA
PEER
CHL
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
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.
24
Fostering competition
25
FDI restrictions are relatively low overall FDI Regulatory Restrictiveness Index, 2016 (0-1 from open to closed) 0.20
0.20
0.15
0.15
0.10
0.10
0.05
0.05
0.00
0.00
Note: LAC-5 is a simple average of Argentina, Brazil, Colombia, Chile and Mexico. Source: OECD FDI Restrictiveness Index.
26
Services trade restrictions are high A. Overall STRI 2017 Scale 0-1 from least to most restrictive 0.4
0.4
0.3
0.3
0.2
0.2
0.1
0.1
0
0
Note: LAC-4 refers to a simple average of Brazil, Chile, Colombia and Mexico. Source: OECD Services Trade Restrictiveness Index (STRI).
27
Regulations are stringent
3.5
OECD Product Market Regulation Indicator (higher=more stringent)
3.5
3.0
3.0
2.5
2.5
2.0
2.0
1.5
1.5
1.0
1.0
0.5
0.5
0.0
0.0
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.
28
State controls restrict competition 0
1
2
3
State control (Overall) Scope of state-owned enterprises
4
5
6 Costa Rica LAC-5
Government involvement in network sectors Direct control over business enterprises
OECD
Governance of state-owned enterprises Price controls
Command & control regulation Level of PMR score 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.
29
Barriers to entrepreneurship are high 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
Costa Rica LAC-5 OECD
Legal barriers to entry Antitrust exemptions Barriers in network sectors Level of PMR score
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.
30
The insolvency process is lengthy and the debt recovery rate is low World Bank Doing Business: Resolving insolvency, 2017 Distance to the frontier (100=best practice) 100
100
90
90
80
80
70
70
60
60
50
50
40
40
30
30
20
20
10
10
0
0
Source: : World Bank Doing Business 2018 database.
31
Recommendations to foster competition • 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 StateOwned 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
Making labour markets more inclusive
33
Informality remains stubbornly high Share of workers with informal jobs
%
%
50
50
45
45
40
40
35
35
30
30
25
25
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
Source: INEC Encuesta Continua de Empleo.
2014
2015
2016
2017
34
Informality is widespread Informality by worker characteristics (for groups with high informality rates), 2017 % 100 90 80 70 60 50 40 30 20 10 0
Women
Over 60
Less than primary education
Less than secondary education
Rural
Self-employed Part-time
1. Low income refers to hourly earnings of less than the lowest minimum wage. Source: INEC Encuesta Continua de Empleo.
Low incomeยน
% 100 90 80 70 60 50 40 30 20 10 0
35
The minimum wage is high and complex and discourages formalisation %
Minimum wage as a percentage of the median wages of full-time workers, 2016 100
90
90
80
80
70
70
60
60
50
50
40
40
30
30
20
20
10
10
0
0
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
100
Note: For Costa Rica, the calculations use the minimum wage of unskilled workers. Source: OECD Labour Force Statistics Database.
36
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
Enhancing education outcomes
38
Education spending is high Public expenditure on education, 2015 % of GDP
% of GDP
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.
NOR
CRI
NZL
0
NLD
0
OECD
1
KOR
1
LAC-5
2
PRT
2
MEX
3
EST
3
LVA
4
SVN
4
POL
5
COL
5
TUR
6
CHL
6
ESP
7
ITA
7
SVK
8
HUN
8
JPN
9
CZE
9
39
Education outcomes are low Student performance in PISA, 2015 Mean of reading, science and mathematics scores
600
600
Note: LAC-5 is a simple average of Argentina, Brazil, Colombia, Chile and Mexico. Source: OECD Programme for International Student Assessment (PISA).
JPN
EST
KOR
SVN
NLD
NZL
NOR
POL
PRT
OECD
ESP
300
CZE
300
LVA
350
ITA
350
HUN
400
SVK
400
CHL
450
LAC-5
450
TUR
500
CRI
500
MEX
550
COL
550
40
Educational inequalities are high Relationship between student performance and socio-economic status Variation in PISA scores explained by socio-economic status,2015 % points
% points 30
25
25
20
20
15
15
10
10
5
5
0
0
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
30
Note: LAC-5 is a simple average of Argentina, Brazil, Colombia, Chile and Mexico. Source: OECD (2016): PISA 2015 Results.
41
Recommendations to improve education outcomes • 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