Annual data2007(a)Historical averages (%)2003-07Population (m)4.5Population growth1.8GDP (US$ bn; market exchange rate)26,267.2Real GDP growth6.6GDP (US$ bn; purchasing power parity)44,679Real domestic demand growth4.7GDP per head (US$; market exchange rate)5,871Inflation11.3GDP per head (US$; purchasing power parity)9,987Current-account balance (% of GDP)-5.0Exchange rate (av) C:US$516.62FDI inflows (% of GDP)5.1(a) Actual.

Background: Costa Rica has historically benefited from political stability. A short civil war in 1949 opened the way for institutional reforms that led to a long period of rapid economic growth, resulting in significant improvements in human development. Since a debt crisis in the early 1980s, however, performance has been mixed as Costa Rica has struggled to define a new economic model. The country has succeeded in attracting high-tech investment, but income inequality and social tension have grown. An economic reform agenda has been subject to severe delays.

Political structure: The president, elected for a four-year mandate by universal adult suffrage, is the head of state. The executive is relatively weak in relation to the 57-member unicameral Legislative Assembly. Re-election for the president and deputies is permitted, but not consecutively. A political system historically dominated by the social democratic Partido Liberacion Nacional (PLN) and the right-wing Partido Unidad Social Cristiana (PUSC) has become fragmented in recent years, with other parties now wielding increased power, compounding difficulties of governability. The Supreme Court is at the apex of the judicial system, with its magistrates appointed by Congress for an eight-year term.

Policy issues: A fiscal reform is needed to raise revenue and allow a reduction in public debt, which would help monetary policy efficiency and raise potential GDP growth. Reforms are also needed to address the deficiencies of the business environment, including patchy infrastructure and a lack of affordable financing. While a future PLN administration would be committed to capitalising on Costa Rica's entry into the Dominican Republic-Central American Free-Trade Agreement (DR-CAFTA) in 2009 and attracting foreign investment, a PAC government would place a lesser priority on the agreement.

Taxation: The overall level of taxation is relatively low. Tax evasion has been reduced since 2006, contributing to growth in tax collection, but remains high. The tax system is dominated by customs, income and sales taxes. A long-delayed project for fiscal reform seeks to overhaul existing taxes and create new ones to broaden the taxpayer base.

Foreign trade: Export value growth has been rapid, owing to the dynamism of free-trade zones (FTZs) and strong demand for microprocessors from China. However, the import bill expanded rapidly in 2008, leading the structural trade deficit to widen sharply as a percentage of GDP and widening the current-account deficit.

Major exports 2008% of totalMajor imports 2008% of totalMaquila (offshore assembly for re-export)& zonas francas33.7Intermediate goods52.3Manufactured goods22.2Consumer goods18.0Bananas7.0Capital goods15.5Coffee3.4      Leading markets 2007% of totalLeading suppliers 2007% of totalUS37.9US38.6China15.1China6.4Netherlands4.9Mexico5.7Panama3.5Japan5.6