RSF Assessment Letter - Costa Rica - Resilience and Sustainability Facility (RSF)

Jul 19, 2026

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RSF Assessment Letter for Costa Rica analyzes how economic progress and institutional capacity have improved resilience to climate and other external shocks, while fiscal vulnerabilities and limited fiscal space constrain near-term public investment. It details climate exposure risks, including frequent adverse events, disaster impacts on tourism, agriculture, health, education, and hydropower, plus potential long-term effects on growth, fiscal outcomes, poverty, and vulnerability. It also reviews decarbonization and ecosystem restoration achievements alongside the need to continue climate-responsive policy and financing.

LanguageEnglish

CategoryResearch & Report

FormatPDF

Pages3

Reading Time8 min

Key climate change implications for Costa Rica

Exposure, risks, and potential economic impacts

Sector effects: tourism, agriculture, energy

Costa Rica’s policies and strategies

Disaster risk management measures

National adaptation planning and sector milestones

Financial tools and ecosystem protection

Public Disclosure Authorized Public Disclosure Authorized RSF ASSESSMENT LETTER – COSTA RICA October 26, 2022 1. Climate change implications for Costa Rica. Costa Rica’s economic progress over the last two decades allowed it to become more resilient to exogenous shocks, including climate events. Costa Rica doubled its income per capita during this period, relying on relatively solid institutions, an outward-oriented growth model and investments in human capital. The country upgraded and diversified its exports, increasing resilience to external shocks, and invested in preparedness against domestic shocks, including related to natural disasters. Improvements in institutional capacity with respect to multi-sectoral coordination and implementation of sector-specific policies have been critical for preparedness. However, fiscal vulnerabilities built up during this period, as spending increased while revenues stayed flat. Fiscal space is currently limited, reducing the potential for increasing public investment in the short run. In this context, it is critical to continue pursuing a fiscal consolidation and rebuilding fiscal buffers for implementing decarbonization related investments as well as navigating climate related shocks. Climate change affects Costa Rica through intensification of extreme climate events and natural hazardsand through key economic sectors. Despite recent achievements, Costa Rica still ranks 61 out of 182 countries in the 2022 ND-GAIN Index1. Approximately 6.8% of its total area is exposed to three or more adverse natural events. Around 80 percent of Costa Rica’s population reside in areas at high risk of multiple hazards. In 1998-2018, infrastructure damage from rains and droughts averaged 0.7 percent of GDP2. Studies suggest that climate change could increase the frequency of occurrence of weather-related events and the intensity of these phenomena. In a high-risk scenario, damage could rise to 1.6 to 2.5 percent per year over the medium term. Natural disasters have complex, interrelated effects on Costa Rica’s people through death, disease, displacement, loss of physical assets, and disruptions in income and key services such as health and education. This could lead to long lasting impacts on growth, fiscal, poverty and vulnerability. Natural disasters disrupt the country’s buoyant tourism sector, for example through coastal flooding from rising seas and storms. Agriculture is vulnerable to extreme events, including floodsand droughts, as well as rising temperatures and desertification driven by poor land use practices. Key crops such as coffee beans, and bananas will be negatively affected. Changing rainfall patterns can also affect hydroelectric powerplants which account for most of the energy produced in Costa Rica. These could have significant fiscal and financial implications and affect long-term growth. Costa Rica’s efforts to fight climate change and restore ecosystems have resulted in a significant reduction of greenhouse gas (GHG) emissions per capita over the last decade, but this trend could reverse. Placing the sustainable use of natural resources at the core of its development strategy, Costa Rica has become the only tropical country in the world that has reversed deforestation, more than doubling its area covered by forests from 26 percent of its territory in 1983 to 59 percent today. National parks and protected areas comprise 26 percent of land area and contribute to a successful eco-tourism industry. The share of renewables in the energy sector is among the largest in the world. Wind technologies contributed significantly to electricity generation, allowing a drastic reduction in the use of oil during the last decade. Finally, Costa Rica has attracted multinational corporations with sustainable investments. Emissions amounted to a low 11.5 megatons in 2020-below most upper middle-income countries. Emissions come mainly from transport (43 percent), agriculture (21 percent), ind

FAQs

How has Costa Rica improved resilience to external shocks over the past two decades?

Economic progress supported resilience through solid institutions, outward-oriented growth, human capital investment, export upgrades, and preparedness against domestic shocks, including natural disasters.

What climate risks are highlighted for Costa Rica and which sectors are most affected?

Risks include intensified extreme events and natural hazards, with high population exposure and infrastructure damage. Tourism, agriculture, and hydropower are emphasized as vulnerable sectors.

What policies and strategies does Costa Rica use to adapt to climate change and finance resilience?

The country strengthens disaster risk management via response systems, building codes, environmental standards, land use planning, and institutional frameworks. It advances a National Adaptation Plan aligned with national risk management policy, and uses insurance and disaster financing strategies to enhance financial resilience.

Jul 19, 2026

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