Faced with the threat of a global economic slowdown and the possibility of the U.S. entering recession next year, businessmen in the region argue that to mitigate possible adverse effects, it is key to diversify export destinations.
Market analysts assure that the slowdown in U.S. economic activity is already a reality, and that what is still not clear, is the possibility that the economy will go into recession next year.
Due to the crisis affecting Nicaragua and paralysis of construction in Panama between April and May, the IMF has reduced the expectation of economic growth for the Central American region from 4% to 3.3%.
The International Monetary Fund (IMF) cut growth forecasts for the Central American economy, due to the uncertainty caused by the situation in Nicaragua and its effect on the region's economic activity, and the impact of the construction strike in Panama, which has halted works on 260 projects nationwide for the last 30 days.
In the optimistic scenario, which foresees an end to the crisis in Nicaragua by the end of July, economic growth at the end of 2018 would be only 1.7%, with $400 million losses in added value.
The Nicaraguan Foundation for Economic and Social Development projects that a possible first scenario would be one where "...the government accepts an early exit negotiated and implemented no later than the end of July, thus achieving a framework of understanding focused on the issues of justice and democratization, putting an end to repression, violence and citizen insecurity."
Due to the crisis in the country, the Central Bank has reduced the estimate of economic growth for this year from the range of 4.5% to 5%, to the range of 3% to 3.5%.
Ovidio Reyes, president of the Central Bank of Nicaragua (BCN), explained that "... the hardest and most regrettable thing about this is the generation of employment.We are expecting the loss of 58,300 new jobs as a result of the lower economic dynamics."
Last year hotel and restaurant activities in Nicaragua grew by 6% compared to 2016 and added $500 million to the GDP, which represents 4% of the total production.
According to figures from the Central Bank of Nicaragua, last year the activities of hotels and restaurants "... grew by 7%, favored by an increase in the arrival of visitors from abroad and an increase in arrivals of cruise ships to the country's main ports."
The Central Bank of Nicaragua forecasts that by the end of 2017 the economy will have grown by between 4.7% and 5.2%, and next year the increase will be between 4.5% and 5%.
From a report by the Central Bank:
The President of the Central Bank of Nicaragua (BCN), Cro.Ovidio Reyes R., presented a general balance of the State of the Nicaraguan Economy during 2017 and the Perspectives for 2018, highlighting that it is estimated that for the current year there will be robust economic growth between 4.7% and 5.2% and inflation between 5% and 6%.The projected economic growth is similar to that of the last 7 years, in which the rate of the Gross Domestic Product (GDP) has averaged 5.2%.
Funides projects that 2017 will close with economic growth of 4.8%, explained mainly by the good performance of exports, which may slowdown in 2018.
From the preface to Funides' Third Economic Situation Report:
FUNIDES projects that the economy will close with a growth of 4.8 percent in 2017. Consumption, after having slowed down during 2016 and much of 2017, now shows signs of some stability, except in the case of consumption of durable goods.There has been a slowdown in investments, while exports of goods and services have shown an acceleration even in the third quarter of the year, and have been a key element in sustaining the current rate of growth.However, there are decreases in exports of harnesses and a slowdown in the textile sector, which is expected to have almost zero growth.Manufacturing continued to be driven by increased activity in certain export products, such as sugar and meat, although less favorable international prices are forecast. The deceleration in the collectionof taxes on added value and on income continued, a trend that had been highlighted in the previous Conjuncture Report.The accumulated deficit of the INSS was less negative as a result of an effort to reduce expenses, in a scenario of increased revenues. Remittances continued to rise, reaching an increase of 10.6 percent in nominal terms in September, well above the recent average. This increase in remittances has been generating a positive effect on consumption in the last months of the year.We are noticing a slowdown in private investment, which could close in figures lower than those of last year.
At the end of the year the Nicaraguan economy could achieve a growth of 4.6%, a tenth less than in 2016, continuing the process of deceleration seen over the last two years.
From a report by Funides:
The Nicaraguan Foundation for Economic and Social Development (FUNIDES) presents its second Economic Situation Report for 2017, showing that economic growth for 2017 will be 4.6 percent, one tenth lower than last year, continuing the process of deceleration seen in the last two years.
The entity highlighted macroeconomic strength, but warned about the Social Security Institute's growing deficit and other risks linked to less cooperation with Venezuela over oil matters.
From a press release issued by the IMF:
This statement summarizes the preliminary findings and recommendations of the mission that visited Managua during April 24-May 5 in the context of the 2017 Article IV consultation.
The economic expectations of entrepreneurs have fallen, in particular because of the business climate, with projections for the rest of 2016 being for less private and public investment.
From the Executive summary of the II Economic Situation Report by Funides:
In the first four months of 2016 the Nicaraguan economy behaved as predicted by FUNIDES in its first Economic Situation Report, with the exception of exports, which were projected to be more vigorous than were actually recorded.
Funides projections for conditions in 2016 are similar to those of 2015 and it estimates that the economy will grow by between 4.5 and 4.7%.
From the executive summary of the "First Economic Situation Report for 2016 " by Funides:
Growth projections for the world economy in 2016 have decreased from 3.4 to 3.2 percent according to the latest projections by the International Monetary Fund.
The IMF noted the positive evolution of all the country's economic indicators, and the drastic fall in poverty, with an increase of 33% in per capita consumption.
From a press release issued by the IMF:
On January 28, 2016, the Executive Board of the International Monetary Fund (IMF) concluded the Article IV consultation1 with Nicaragua.
Economic developments in 2015 have been broadly positive.
Poverty has declined, foreign investment has quintupled in a decade, the economy has grown more than the average in Central America and Nicaraguan businessmen are applauding it.
Carlos Pellas, one of the most successful Central American businessmen with investments in sectors relating to financial insurance, agribusiness, information technology, energy, vehicle distribution, and production and beer and spirits, did not make a statement in a merely personal capacity but rather one relating to the economy of his country, Nicaragua, when he said that "people think that things are going well, there is a lot of investment, construction has grown, it is a dynamic sector, you can tell that from one look".
In the first nine months of the year, economic activity grew by 3.5% compared to the same period in 2014, but the sectors that explained their growth in the first semester, have slowed.
From the executive summary of the report by Funides :
According to the Monthly Economic Activity Index (IMAE) up to September 2015, the growth rate of economic activity began to slow in early 2015.