Costa Rica | Frontier Markets

Emerginvest reports that Costa Rica “amazingly only lost 7.85% in the last year, a figure which ranks it the 8^th best performing market in the world, out of the 80+ that Emerginvest tracks. Of those eight top countries, all are frontier markets – including Ghana, Malawi, and Tunisia in the top three spots.” Moreover, the site predicts a rosy future for the Central American republic:

“Not only has Costa Rica faired extremely well comparatively in the last year, but it has demonstrated strong growth potential in the last quarter, jumping 8.18% in the last month. That ranks Costa Rica as the 7^th highest growth country in the world for the last month, including an astonishing last week where the market jumped 4.45%.”

That said, the 2009 outlook is rather bleak, at least according to Business Monitor International (BMI). Commenting on Costa Rica’s stock index, the Bolsa Nacional de Valores (BNV):

The main rationale behind our bearish stance [on the BNV] is the sober outlook for Costa Rica’s economy. We are now pencilling in real GDP growth of just 0.7% in 2009 (from 1.6% previously) due to a confluence of factors – most notably, our revised US real GDP growth forecast of -2.0% (from 0.2%) and a rapid deterioration in local consumer and business confidence. The two principal companies on the exchange – Florida Ice & Farm and Holcim – which make up a combined 90% of the bourse, are unlikely to shrug off such grave economic challenges. Florida Ice & Farm holds investments in Costa Rican industry, services and tourism, three sectors which will inevitably feel the squeeze of muted demand and falling investment from the US. Meanwhile, Holcim – a producer and suppler of construction products – will suffer the fallout of tighter credit conditions and sluggish activity in the sector. Ominously, construction output growth plunged to a three-year low of 3.4% y-o-y in October 2008, down from a peak of 22.9% y-o-y in January.