Nicaragua: Economic Outline

Economic Indicators

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Nicaragua is the poorest country in Central America and is classified as a Heavily Indebted Poor Country (HIPC) by the IMF and the World Bank.
 In 2022, Nicaragua registered an estimated growth rate of 4%, mainly due to expatriate remittances from the U.S., which support household consumption. According to the IMF, GDP growth is expected to slow down to 3% in 2023 defore picking up to 3.3% in 2024.

In 2022, Nicaragua's economy was negatively impacted higher commodity prices, intensified US sanctions, and the Federal Reserve's tightening monetary policy. The IMF calculated that gross debt stood at 46% of GDP in 2022, and expects it should decrease to 44.5% in 2023 and slightly increase to 45% in 2024. The inflation rate increased to 10.4% in 2022, but it should decrease to 8.5% in 2023 and 5% in 2024. Nicaragua's fiscal deficit, weaker external liquidity and higher country risk undermine the country's economic performance. In previous years, the Nicaraguan economy experienced dynamic growth driven by consumption and investment in the energy and manufacturing sectors, public spending, domestic consumption, greater agricultural production and sustained trade with the United States (its leading export market and primary investor). Nevertheless, social instability derived from political protests affected tourism and lead to higher unemployment rates. Nicaragua has tried for years to reduce investments and finance its current expenditures. The Government also seeks to reduce its dependence on Venezuelan oil by developing renewable energies.

 With the support of the IMF, Nicaragua has pursued structural reforms and a fiscal discipline policy, allowing the country to establish a certain degree of macroeconomic stability. However, attempts to improve the business environment have been insufficient, institutions are weak, the judicial system is inefficient, and corruption is present. Additionally, the government has increased taxes on cigarettes and beer, and increased the tax on business earnings, but these measures are unlikely to generate as much revenue collection as expected. In October 2022, the U.S goverment imposed sanctions on sugar imports, sending out a signal effect that should hinder both private and public investment in the sector throughout 2023. However, high global demand for gold, platinum, coffee, and tobacco should keep agricultural production and exports high in 2023.

According to the IMF, the unemployment rate stood at 7.5% in 2022, and it is expected to decrease to 7.1% in 2023. Still, even though unemployment rates are relatively low, nearly half of those who are employed are actually underemployed, and poverty is widespread. Social issues include high violence rates, high social inequality, extreme poverty, a strong informal economy, civil unrest, police brutality, and lack of freedom of the press - all of which leads an increasing number of Nicaraguans to emigrate to North America. On the other hand, the homicide rate is low and has been falling in recent years.

Monetary Indicators	2016	2017	2018	2019	2020
Nicaraguan Cordoba Oro (NIO) - Average Annual Exchange Rate For 1 GHS	7.17	6.91	6.88	6.37	6.14

Source: World Bank - Latest available data.

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Latest Update: September 2023