Costa Rican economy seen shrinking by most in four decades

FILE PHOTO: A woman wearing a protective face mask walks by a wall with graffiti after health authorities reverse the measures of reopening following the increase in cases of the coronavirus disease (COVID-19) in San Jose, Costa Rica July 13, 2020. REUTERS/Juan Carlos Ulate/File Photo

SAN JOSE (Reuters) - Hit hard by the coronavirus pandemic, Costa Rica’s economy is expected to contract 5% by the end of this year, the country’s central bank said on Thursday, which would mark the steepest decline since 1982 for the Central American nation.

The bank’s previous forecast in April predicted a 3.6% contraction by the end of 2020. To date, coronavirus infections in Costa Rica total more than 17,000 cases in addition to 140 confirmed deaths, according to the government’s official count.

Bank chief Rodrigo Cubero said he sees a “probable, partial recovery” next year with 2.3% economic growth, but cautioned that the estimate could change depending on the course of the pandemic.

The economy’s second-quarter contraction reached 9%, Cubero said, with the country’s key tourist industry comprising hotels and restaurants shrinking by almost half.

President Carlos Alvarado offered a plan this week for a staggered reopening of the economy from Saturday in a bid to reignite economic activity and help businesses plan ahead.

The government is also pursuing spending cuts and considering its credit lines, especially the Stand-By Arrangement it has with the International Monetary Fund that could provide $2.25 billion over the next few years.

Reporting by Alvaro Murillo; Writing by David Alire Garcia, Editing by Sherry Jacob-Phillips