Central Bank forecasts inflationary effects from drought in 2027

Costa Rica's economy is bracing for the potential fallout from the El Niño phenomenon, with the Central Bank issuing a stark warning about inflationary pressures expected between 2026 and 2027. As reported by La Nación, the climatic event is projected to bring about a deficit in rainfall, consequently affecting the availability of water in the nation's hydroelectric reservoirs.

This anticipated scarcity of water resources poses a significant threat to Costa Rica's predominantly hydroelectric energy sector. Experts cited in the report indicate that reduced water levels could lead to increased operational costs for electricity generation, potentially forcing a reliance on more expensive energy sources. This, in turn, is expected to translate into higher energy prices for consumers and businesses alike.

The ripple effect of these energy cost increases is predicted to fuel inflation across the broader economy. The Central Bank's forecast suggests that the combination of reduced water availability and higher energy expenses will likely drive up the prices of goods and services, impacting the purchasing power of Costa Ricans. The nation's economic stability will be closely watched as it navigates the challenges posed by this significant climatic event.