Nicaragua Economic Data & Projections

Nicaragua Economic Outlook

A mixed-growth economy:

Nicaragua is the third-poorest country in the Western Hemisphere, with a GDP of around $15 billion and widespread income inequality. The economy has shown resilience in the face of significant challenges, including political instability, U.S. sanctions, and external shocks. Between 2010 and 2017, Nicaragua experienced stable growth, averaging 4–5% annually, largely driven by construction, agriculture, and foreign direct investment. However, a political crisis in 2018 triggered a sharp contraction, and the country has since struggled with weak investment and stagnant job creation.

Agriculture and remittances drive economic activity:

Nicaragua’s economy is heavily reliant on agriculture, which accounts for nearly 15% of GDP and employs a large portion of the population. The country is a major exporter of coffee, beef, sugar, and gold, with the mining sector seeing significant growth in recent years. Remittances, mostly from the U.S. and Costa Rica, have surged to over 20% of GDP, helping to sustain household consumption. However, reliance on these external inflows highlights structural weaknesses in domestic demand and employment opportunities.

Investment constraints and governance issues:

While Nicaragua benefits from low labor costs and trade agreements such as CAFTA-DR, political uncertainty and strained U.S. relations have dampened investor confidence. The government, led by President Daniel Ortega, has faced increasing international sanctions due to human rights concerns and authoritarian policies. This has made access to international financing more difficult and deterred foreign investment, particularly in the tourism and financial sectors. Additionally, the country’s weak infrastructure and energy reliability issues remain barriers to sustained economic growth.

Social challenges and external risks:

Poverty and underemployment remain widespread, with nearly 45% of the population living below the poverty line. The informal economy is dominant, limiting tax revenue collection and social protections. Climate-related risks, including hurricanes and droughts, further threaten economic stability, particularly for agriculture-dependent communities. Inflation and food insecurity have increased in recent years, exacerbated by global supply chain disruptions and rising energy costs.

Nicaragua’s economic outlook:

The Nicaraguan economy is expected to grow at a modest 2–3% annually in the near term, supported by remittances, mining exports, and public infrastructure projects. However, long-term prospects remain uncertain due to weak private investment, governance concerns, and external geopolitical pressures. Structural reforms to improve the business climate, diversify exports, and strengthen institutional transparency will be key to ensuring more sustainable economic growth.

Bolivia Economic Outlook

Resource-rich economy:

Bolivia's economy is heavily reliant on natural resources, particularly natural gas and minerals such as zinc, silver, and lithium. The country has one of the world's largest lithium reserves, a potential future growth driver as demand for batteries rises. However, Bolivia's economy remains vulnerable to commodity price fluctuations. The state plays a dominant role in key sectors, and nationalization policies have shaped the economic landscape. While these policies have provided short-term stability, they have also deterred foreign investment in key industries, limiting Bolivia’s ability to develop its full economic potential.

Growth and inflation trends:

Bolivia has experienced relatively steady economic growth over the past two decades, driven by exports and public investment. However, economic expansion has slowed recently due to declining natural gas production and falling revenues. While inflation has remained low compared to regional peers, aided by a fixed exchange rate and fuel subsidies, these subsidies have created fiscal pressures that strain government resources. The pandemic further weakened the economy, leading to increased poverty and unemployment. In response, the government has sought to boost economic activity through infrastructure projects and social programs, but concerns about the sustainability of these efforts persist.

Challenges:

The country faces significant fiscal and external deficits, exacerbated by high public spending and weak revenue collection. Bolivia also struggles with an informal economy, which limits tax revenues and complicates monetary policy. Additionally, dependence on commodities makes the country highly vulnerable to external shocks. Political uncertainty has further weighed on investor confidence, particularly after the 2019 political crisis, which saw a disputed election and subsequent instability. Efforts to attract foreign investment, particularly in lithium extraction, have been hampered by regulatory uncertainty and government intervention. Furthermore, logistical and infrastructural bottlenecks hinder Bolivia’s trade potential, increasing costs for businesses and limiting competitiveness.

Bolivia’s economic outlook:

Bolivia’s economy is expected to grow at a muted pace by emerging market standards in the coming years. Efforts to diversify beyond commodities, improve infrastructure, and attract foreign investment will be crucial for long-term prosperity. However, government intervention and policy unpredictability remain key risks to Bolivia’s economic trajectory. The successful development of the lithium sector could provide a significant boost to exports and fiscal revenues, but this will require regulatory clarity and substantial investment. Over the next decade, Bolivia’s ability to balance state control with market-friendly policies will determine whether it can sustain growth and achieve economic stability.

Ecuador Economic Outlook

Oil-dependent economy:

Ecuador's economy is largely dependent on oil exports, which account for a significant portion of government revenues. This reliance makes the country vulnerable to fluctuations in global oil prices, which have historically caused economic volatility. In recent years, economic growth has been sluggish, constrained by external debt, low investment, and slow progress on economic diversification. The COVID-19 pandemic further exacerbated Ecuador’s financial difficulties, leading to a severe recession and increasing poverty levels. While the country has since experienced a moderate recovery, structural weaknesses remain.

Dollarization:

Ecuador has used the U.S. dollar as its official currency since 2000, which has helped control inflation but limited monetary policy flexibility. While dollarization has ensured price stability, it has also made the economy less competitive in regional trade, as Ecuador cannot devalue its currency to boost exports. Additionally, reliance on the U.S. dollar means the country must maintain strong foreign exchange reserves, which can be challenging during periods of low oil revenues or external shocks. This constraint has made fiscal policy Ecuador’s primary tool for managing economic fluctuations, increasing the importance of sound public finances.

Debt concerns:

The government has faced fiscal deficits and rising debt, leading to agreements with the International Monetary Fund (IMF) to implement economic reforms. However, austerity measures have faced public opposition, contributing to political instability. Successive administrations have struggled to balance fiscal discipline with the need for social spending, particularly in education, healthcare, and infrastructure. High debt levels have limited the government’s ability to invest in long-term growth initiatives, making economic sustainability a pressing concern.

Ecuador’s economic outlook:

Ecuador’s economic future depends on diversifying its economy, improving governance, and attracting investment in sectors such as agriculture, mining, and tourism. While oil prices remain a key determinant of short-term growth, structural reforms will be essential for long-term stability. Efforts to strengthen the business climate, reduce corruption, and enhance infrastructure will be crucial to attracting private investment. The government must also navigate social and political tensions carefully, as unpopular economic measures could lead to unrest and further instability. If managed effectively, Ecuador has the potential to achieve stable growth and reduce its dependence on oil revenues over the next decade.

Paraguay Economic Outlook

Agricultural powerhouse:

Paraguay is a major agricultural exporter, particularly of soybeans and beef, which drive much of its economic activity. Its agricultural success has been supported by vast arable land, a favorable climate, and trade agreements, particularly with Mercosur partners. Paraguay’s agricultural sector benefits from modern farming techniques and strong demand from China and Brazil. However, the country remains vulnerable to climate-related disruptions, such as droughts, which can significantly impact production and export revenues.

Stable macroeconomic environment:

Unlike some regional peers, Paraguay has maintained relatively low inflation and stable public finances. The country has one of the lowest debt-to-GDP ratios in South America, providing room for public investment. Paraguay’s fiscal discipline and prudent economic management have allowed it to weather external shocks better than some neighboring countries. However, the financial sector remains underdeveloped, limiting access to credit for businesses and consumers. Strengthening the banking system and improving financial inclusion will be key to supporting long-term growth.

Challenges:

Despite macroeconomic stability, Paraguay struggles with high levels of informality, weak infrastructure, and institutional weaknesses. Corruption and limited industrial development hinder economic diversification. Additionally, social inequality remains a concern, with significant disparities in income and access to basic services. While the country has made progress in expanding access to education, more investment is needed to improve the quality of the workforce and enhance productivity.

Paraguay’s economic outlook:

Paraguay’s economy is expected to see growth above the Latin American average, driven by agriculture, hydropower exports, and infrastructure development. Strengthening institutions and investing in education and industry will be key for sustaining long-term economic growth. The government aims to attract foreign direct investment in sectors such as manufacturing and technology, which could help reduce reliance on agriculture.

Nicaragua's Macroeconomic Analysis:

Nominal GDP of USD 17.8 billion in 2023.

GDP per capita of USD 2,671 compared to the global average of USD 10,589.

Average real GDP growth of 3.1% over the last decade.

Sector Analysis

In 2022, services accounted for 46% of overall GDP, manufacturing 14%, other industrial activity 25%, and agriculture 15%. Looking at GDP by expenditure, private consumption accounted for 78% of GDP in 2023, government consumption 12%, fixed investment 23%, and net exports -13%.

International trade

In 2021, manufactured products made up 39% of total merchandise exports, mineral fuels 1%, food 44%, ores and metals 1% and agricultural raw materials 1%, with other categories accounting for 14% of the total. In the same period, manufactured products made up 68% of total merchandise imports, mineral fuels 14%, food 16%, ores and metals 1% and agricultural raw materials 1%, with other goods accounting for 0% of the total. Total exports were worth USD 7 billion in 2023, while total imports were USD 9 billion.