Costa Rican consumers are expected to begin feeling the first effects of the inflationary shock linked to the conflict in the Middle East starting in May, with fuel, imported goods and some food prices likely to face the earliest pressure.
The Banco Central de Costa Rica said the impact will come with a delay because of the way local prices adjust, especially in regulated sectors such as fuel. BCCR President Róger Madrigal said the size and duration of the shock remain uncertain, but the first clear effects should begin showing up this month.
Fuel is expected to be the most immediate channel. Higher international oil prices generally take time to move through Costa Rica’s local pricing system, which means price data through March had not yet reflected the full increase in global petroleum costs. The Central Bank said March inflation numbers still did not include the effects tied to higher international oil prices.
The pressure is not limited to gasoline and diesel. Imported goods may also become more expensive if transport and production costs rise. Food prices could also be affected through fertilizer costs, since many agricultural inputs are tied to energy prices and global supply chains. The World Bank warned this week that the Middle East war is expected to push energy prices up 24% this year, while fertilizer prices are projected to rise 31%, led by a sharp increase in urea prices.
Despite the expected price pressure, Costa Rica is starting from a low inflation base. The BCCR reported that year-on-year inflation remained negative during the first quarter, while underlying inflation was close to zero. The bank expects headline inflation to stay negative during the first half of 2026 before moving back into its tolerance range later in the year.
That return is now expected sooner than previously forecast. The Central Bank projects inflation will re-enter the 2% to 4% tolerance range in the fourth quarter of 2026, rather than in the second quarter of 2027 as estimated in January. The bank’s formal target is 3%, with a margin of one percentage point above or below.
The shift comes as Costa Rica faces a more difficult global environment. The BCCR said the conflict has changed the international outlook, increasing uncertainty in financial markets, supply chains and commodity prices, especially oil and basic grains. The bank also said inflation pressures have reappeared in some countries, reversing part of the disinflation seen in recent years.
The Central Bank also lowered its economic growth outlook. Costa Rica’s economy is still expected to expand, but the BCCR now projects average growth of 3.5% for 2026 and 2027. That represents a downward adjustment from the January forecast, with the revision tied to weaker global conditions, higher commodity prices and softer expectations for domestic demand.
For households, the most visible impact could come at the pump first, followed by gradual changes in the prices of imported products and some foods. For businesses, higher fuel and input costs could affect shipping, agriculture, construction and other sectors that depend heavily on imported materials.
The BCCR said it will continue monitoring inflation expectations, international prices and local demand as it decides future monetary policy. The next few months will show how much of the external shock is passed on to Costa Rican consumers, and how long the pressure lasts.
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