Economic Outline

flag Nicaragua Nicaragua: Economic Outline

Economic Indicators

For the latest updates on the key economic responses from governments to address the economic impact of the COVID-19 pandemic, please consult the IMF's policy tracking platform Policy Responses to COVID-19.

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 2021, Nicaragua registered an estimated growth rate of 5%, mainly due to expatriate remittances from the U.S., which support household consumption amid the country's slow labour market. According to the IMF, GDP growth is expected to slow down to 3.5% in 2022 and 2.2% in 2023.

The IMF calculated that gross debt stood at 49.5% of GDP in 2021, and expects it should decrease to 48.1% in 2022 and 48.9% in 2023. The inflation rate increased to 4.1% in 2021, but it should decrease to 3.6% in 2022 and 3.5% in 2023. 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 2021, to mitigate the impact of COVID-19, the government continued implementing a series of fiscal measures prioritising programs to strengthen the social safety net, including the provision of food packages among vulnerable families. Furthermore, the Central Bank of Nicaragua reduced its repo reference rate by 300 bps, temporarily reduced reserve requirements in domestic currency, and updated its Business Continuity Plan COVID-19 to guarantee the continuity of financial, treasury, accounting and administrative operations. Overall, Nicaragua's fiscal measures to mitigate the pandemic have been effective in boosting economic activity, which has been gradually recovering.

According to the IMF, the unemployment rate was heavily affected by the negative economic impact of the COVID-19 pandemic, and rose to 11% in 2021. However, that rate is expected to decrease in the next couple of years, reaching 7.5% in 2022 and 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. On the other hand, the homicide rate is low and has been falling in recent years.

 
Main Indicators 201920202021 (e)2022 (e)2023 (e)
GDP (billions USD) 12.6312.6213.4013.9514.32
GDP (Constant Prices, Annual % Change) -3.7e-2.0e5.03.52.2
GDP per Capita (USD) 1,9341,9432,0472,1092,144
General Government Gross Debt (in % of GDP) 41.7e47.9e49.548.148.9
Inflation Rate (%) 5.43.7e4.13.63.5
Current Account (billions USD) 0.750.960.560.560.53
Current Account (in % of GDP) 6.07.6e4.14.03.7

Source: IMF – World Economic Outlook Database - October 2021.

Note: (e) Estimated Data


 
Monetary Indicators 20162017201820192020
Nicaraguan Cordoba Oro (NIO) - Average Annual Exchange Rate For 1 MUR 0.810.870.930.930.87

Source: World Bank - Latest available data.

 

Main Sectors of Industry

Agriculture accounted for 15.5% of GDP in 2017. Products include coffee, bananas, sugarcane, rice, corn, tobacco, cotton, sesame, soya, beans, beef, veal, pork, poultry, dairy products, shrimp, lobsters, and peanuts.

Industry accounted for 24.4% of GDP in 2017. It includes food processing, chemicals, machinery and metal products, knit and woven apparel, petroleum refining and distribution, beverages, footwear, wood, electrical wire, and mining.

Services accounted for the remaining 50.8% of GDP in 2017.

 
Breakdown of Economic Activity By Sector Agriculture Industry Services
Employment By Sector (in % of Total Employment) 30.6 16.2 53.2
Value Added (in % of GDP) 15.8 25.1 49.3
Value Added (Annual % Change) 0.8 -1.7 -3.0

Source: World Bank - Latest available data.

 
Socio-Demographic Indicators 20212022 (e)2023 (e)
Unemployment Rate (%) 11.17.57.2

Source: IMF – World Economic Outlook Database - Latest available data

 

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The Active Population in Figures

201820192020
Labour Force 3,007,3383,060,5963,028,201

Source: International Labour Organization, ILOSTAT database

 
201720182019
Total activity rate 69.26%69.40%69.53%
Men activity rate 86.01%86.50%86.94%
Women activity rate 53.27%53.06%52.86%

Source: International Labour Organization, ILOSTAT database

 

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Indicator of Economic Freedom

Definition:

The Economic freedom index measure ten components of economic freedom, grouped into four broad categories or pillars of economic freedom: Rule of Law (property rights, freedom from corruption); Limited Government (fiscal freedom, government spending); Regulatory Efficiency (business freedom, labour freedom, monetary freedom); and Open Markets (trade freedom, investment freedom, financial freedom). Each of the freedoms within these four broad categories is individually scored on a scale of 0 to 100. A country’s overall economic freedom score is a simple average of its scores on the 10 individual freedoms.

Score:
56,3/100
World Rank:
125
Regional Rank:
23

Economic freedom in the world (interactive map)
Source: Index of Economic Freedom, Heritage Foundation

 
 

Country Risk

See the country risk analysis provided by Coface.

 

Indicator of Political Freedom

Definition:

The Indicator of Political Freedom provides an annual evaluation of the state of freedom in a country as experienced by individuals. The survey measures freedom according to two broad categories: political rights and civil liberties. The ratings process is based on a checklist of 10 political rights questions (on Electoral Process, Political Pluralism and Participation, Functioning of Government) and 15 civil liberties questions (on Freedom of Expression, Belief, Associational and Organizational Rights, Rule of Law, Personal Autonomy and Individual Rights). Scores are awarded to each of these questions on a scale of 0 to 4, where a score of 0 represents the smallest degree and 4 the greatest degree of rights or liberties present. The total score awarded to the political rights and civil liberties checklist determines the political rights and civil liberties rating. Each rating of 1 through 7, with 1 representing the highest and 7 the lowest level of freedom, corresponds to a range of total scores.

Ranking:
Partly Free
Political Freedom:
4/7

Political freedom in the world (interactive map)
Source: Freedom in the World Report, Freedom House

 

Indicator of Freedom of the Press

Definition:

The world rankings, published annually, measures violations of press freedom worldwide. It reflects the degree of freedom enjoyed by journalists, the media and digital citizens of each country and the means used by states to respect and uphold this freedom. Finally, a note and a position are assigned to each country. To compile this index, Reporters Without Borders (RWB) prepared a questionnaire incorporating the main criteria (44 in total) to assess the situation of press freedom in a given country. This questionnaire was sent to partner organisations,150 RWB correspondents, journalists, researchers, jurists and human rights activists. It includes every kind of direct attacks against journalists and digital citizens (murders, imprisonment, assault, threats, etc.) or against the media (censorship, confiscation, searches and harassment etc.).

World Rank:
121/180

Source: World Press Freedom Index, Reporters Without Borders

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Sources of General Economic Information

Main Online Newspapers and Portals
El Nuevo Diario (in Spanish)
La Prensa (in Spanish)
Confidencial (in Spanish)
The Tico Times (in English)
Today Nicaragua (in English)
Nicaragua Newspapers online
Nicaragua News Site
Useful Resources
Ministry of Finance and Public Credit
Ministry of the Interior
Central Bank of Nicaragua
 
 

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Latest Update: May 2022