Reducing costs and barriers to foreign trade in Central American economies is key for the region to overcome the economic recession caused by the outbreak of Covid-19.
A report prepared by the World Bank explains that boosting economic activity and employing a higher percentage of the labor force are objectives that can be achieved through reforms that strengthen the private sector and attract investment.
The next U.S. president is not yet known, but in the region it is expected that in an eventual new Trump administration, the focus will be on the recovery of the U.S. economy, while an eventual Biden administration would focus on countering corruption and illegal migration.
Two days after Election Day took place, the United States is experiencing an atmosphere of tension and uncertainty, since because the results are closed, neither candidate can yet be declared the winner.
The World Bank projects that the Central American economy will contract by 3.6% this year, due to restrictions on movement, a decline in remittances and tourism, and a drop in agricultural prices.
The sudden and widespread impact of the coronavirus pandemic and the measures taken to contain it have caused a drastic contraction in the global economy, which, according to World Bank forecasts, will shrink by 5.2% this year, the bank reported on June 8.
Nicaraguan businessmen believe that electoral reform is essential to reactivate the country's economic activity, which has been in decline since the crisis erupted in 2018.
According to estimates by the International Monetary Fund (IMF), Nicaragua's Gross Domestic Product contracted by 5.7% in 2019, a drop that complements the year-on-year variation of -3.8% recorded in 2018.
After production in Nicaragua fell 3.8% in 2018, the IMF estimates that during 2019 the GDP will contract by 5.7%, however, the agency predicts that by 2020 the variation could be only -1.2%.
Real GDP is estimated to have contracted by another 5.7% in 2019 due to the deterioration in aggregate demand, fiscal consolidation and sanctions, the IMF reported after its visit to the country.
The outlook for some economies in the region for 2019 is not the best: in Nicaragua GDP is expected to fall between 5% and 7%, while in Costa Rica the growth estimate at the end of the year was reduced from 3.2% to 2.2%.
The estimates of the Nicaraguan Foundation for Economic and Social Development (Funides), presented in its "Informe de Coyuntura - Julio 2019", indicate that by 2019 an economic contraction of between 5.4% and 6.8% will be reported in the country.
New World Bank projections estimate that because of Nicaragua's political crisis, the country's GDP will fall 4% this year and 1% in 2019.
According to the expectations of the international organization, Nicaragua will be the only economy that will decrease in Central America, because of the political and social crisis in which the country is involved since last April, it is expected that the Gross Domestic Product (GDP) will decrease 3.8% in 2018 compared to 2017.
The Central Bank has reviewed its projections in the current complicated context, and expects an economic growth rate between 0.5% and 1.5%, and an inflationary rhythm in the range of 6.5% to 8.5%.
According to authorities at the Central Bank of Nicaragua, the "... new projection of economic growth for the year 2018 is between 0.5 percent and 1.5 percent. On the other hand, inflation is estimated between 6.5 and 8.5 percent.In relation to labor, a loss of 85,100 jobs is projected, which is equivalent to a rate of around 6 percent."
Economic growth in 2017 exceeded expectations, and although the outlook for 2018 is optimistic, the entity points out that there is a need to reduce tax expenditure and rationalize subsidies.
From a statement issued by the IMF:
Economic performance in 2017 was above expectations and the 2018 outlook is favorable. To minimize downside risks, Nicaragua needs to further fortify its policy framework by (i) hastening the implementation of the international taxation law, reducing tax expenditures, rationalizing subsidies, and implementing a comprehensive reform of the Social Security, (ii) enhancing the supervisory perimeter, (iii) reinforcing the AML/CFT framework, and (iv) building financial buffers and further increasing international reserves.
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 rating agency highlights growth at rates of 5% achieved in the last five years, but estimates that in 2017-18 this will fall to 4.5%, partly due to the effect of a reduction in financial flows from the program with Petrocaribe.
From a statement issued by Fitch Ratings:
Fitch Ratings-New York-23 August 2017: Fitch Ratings has affirmed Nicaragua's Long-term foreign currency Issuer Default Ratings at 'B+' with a Stable Outlook.
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 Central Bank estimates that GDP will grow between 4.5% and 5%, and inflation will be in the range of between 5.5% and 6.5%.
From a statement issued by the Central Bank:
The President of the Central Bank of Nicaragua (BCN), Ovidio Reyes Ramirez, presented on January 5, 2017 an overall assessment of the performance of the Nicaraguan economy in 2016 and also the prospects for 2017, noting that it is estimated that robust economic growth will be achieved of between 4.6 and 4.9% for 2016 for the sixth consecutive year, and annual inflation of 3.13 percent.
The Nicaraguan economy continues to record high growth rates and sustainable macroeconomic policies, with an average GDP growth of 5.2% in recent years.
Statement issued by the IMF:
IMF Concludes Staff Visit to Nicaragua
Press Release No. 16/191
April 29, 2016
A staff team from the International Monetary Fund (IMF) led by Gerardo Peraza visited Managua during April 25–29, 2016.