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Financials

Costa Rica's central bank lifts growth forecast amid manufacturing rebound

SAN JOSE, July 30 (Reuters) - Costa Rica’s central bank on Friday raised its growth forecast to 3.9% from 2.9%, citing a rebound in manufacturing activity and a slight rise in the performance of the tourism sector despite the pandemic.

Central bank President Rodrigo Cubero said that the progress in vaccinations has helped improve economic activity and forecast a deficit of 6.2% of the Gross Domestic Product (GDP) this year compared with 8.7% in 2020.

About 46% of the eligible population has been inoculated with one dose of the coronavirus vaccine, while 16% have received two doses, according to data from the social security authority.

Cubero said economic prospects would remain favorable if lawmakers approved a fiscal adjustment linked to the financing plan stemming from the $1.8 billion International Monetary Fund credit line agreement.

“Without this adjustment, the debt would continue to grow and that would generate enormous uncertainty and a lot of mistrust by the markets, consumers and investors,” Cubero said in a news conference.

This uncertainty would also “have an effect on interest rates and inflation, which is now contained,” he added.

The IMF agreement allows for an initial disbursement of $292 million, but the rest is subject to the approval of fiscal adjustment measures.

The central bank also revised upward its growth forecast for next year to 3.7%, having previously predicted the economy would expand 3.6% in 2022.

The Central American nation’s economy shrunk 4.5% in 2020 because of the pandemic, its biggest decline in four decades.

Reporting by Alvaro Murillo. Writing by Drazen Jorgic. Editing by Gerry Doyle

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