Costa Rica's monetary inflexibility constrains the ratings. Limiting the effectiveness of its monetary policy is a combination of a high level of dollarization in the financial system, limited exchange rate flexibility, and quasi-fiscal losses at the central bank. As a result, Costa Rica has suffered from a higher inflation rate than most neighboring countries and most of its trading partners. Inflation, which reached about 14% in 2008, could decline to 8% this year but will remain higher than in most Central American countries. A current account deficit of about 9% of GDP in 2008 highlights the country's vulnerability to a sudden loss of external funding. Although the deficit will likely decline toward 5% of GDP in 2009, it remains comparatively
