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_________________________________________________________________________________________________________________________________________________________ Country Report Nicaragua Generated on December 19th 2021 Economist Intelligence Unit 20 Cabot Square London E14 4QW United Kingdom _________________________________________________________________________________________________________________________________________________________ The Economist Intelligence Unit The Economist Intelligence Unit is a specialist publisher serving companies establishing and managing operations across national borders. For 60 years it has been a source of information on business developments, economic and political trends, government regulations and corporate practice worldwide. 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ISSN 2047-5454 Symbols for tables "0 or 0.0" means nil or negligible;"n/a" means not available; "-" means not applicable Nicaragua 1 Nicaragua Summary 2 Briefing sheet Outlook for 2022-26 5 Political stability 6 Election watch 6 International relations 7 Policy trends 7 Fiscal policy 8 Monetary policy 8 International assumptions 8 Economic growth 10 Inflation 10 Exchange rates 10 External sector 10 Forecast summary Data and charts 11 Annual data and forecast 12 Quarterly data 13 Monthly data 14 Annual trends charts 15 Monthly trends charts 16 Comparative economic indicators Summary 16 Basic data 18 Political structure Recent analysis Politics 20 Analysis Economy 22 Forecast updates Country Report December 2021 www.eiu.com © Economist Intelligence Unit Limited 2021 Nicaragua 2 Briefing sheet Editor: Abhijit Surya Forecast Closing Date: December 7, 2021 Political and economic outlook Nicaragua is a small, open economy that is highly dependent on agriculture and light manufacturing. A poor business environment, persistent political conflict and limited access to private-sector finance all weigh on the country's long-term growth prospects. The president, Daniel Ortega, and the vice-president, Rosario Murillo (who is also the first lady), won re-election in November in a stage-managed election with only token opposition. The duo's absolute control over state institutions and the security forces will allow them to continue developing their dynastic authoritarian regime. There will be a risk of ad hoc state interventionism—primarily in terms of tax and regulatory enforcement—aimed at undermining regime opponents. However, broadly speaking, the government will retain an orthodox policy framework, with the private sector driving (modest) productivity gains in the 2022-26 forecast period. A bumper recovery in 2021—spurred largely by extremely supportive external conditions—has helped the Nicaraguan economy to recover quickly to levels seen before the covid-19 pandemic. However, growth is set to slow markedly in 2022-26, reflecting a lack of private- sector credit, a poor business environment and a moderation in external demand. The Ortega regime received significant multilateral funding for pandemic assistance and post- hurricane reconstruction in 2021. However, sources of financing will dwindle over the medium term, raising pressure on the fiscal accounts and on the reserves position. Recurring political conflict and weak confidence in the rule of law will subdue growth prospects, despite lucrative opportunities in mining, energy and manufacturing. Nicaragua will therefore remain one of the poorest countries in the region. The US and its allies will increase pressure on the Nicaraguan regime to undertake pro- democracy reforms. Although EIU believes that Western powers will refrain from imposing destabilising economy-wide sanctions, there are risks to this assumption. Key indicators 2021a 2022b 2023b 2024b 2025b 2026b Real GDP growth (%) 8.5 2.0 2.0 1.7 1.7 1.7 Consumer price inflation (av; %) 4.7 5.7 4.6 4.4 4.3 4.1 Government balance (% of GDP) -2.7 -1.2 -1.2 -1.4 -1.5 -2.0 Current-account balance (% of GDP) -1.4 -1.0 -0.5 1.0 1.7 1.8 Short-term interest rate (av; %) 3.6 3.8 4.0 4.2 4.2 4.2 Unemployment rate (%) 5.0 4.9 4.9 4.8 4.8 4.7 Exchange rate C:US$ (av) 35.20 35.90 36.62 37.35 38.10 38.86 a b EIU estimates. EIU forecasts. Country Report December 2021 www.eiu.com © Economist Intelligence Unit Limited 2021
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