Nicaragua Economic Outlook
GDP growth slowed in Q3 last year as an acceleration in private consumption was more than offset by slower expansions in public spending and exports, and a stronger contraction in fixed investment. In Q4, despite tighter financial conditions, economic activity accelerated due to improvements in the agriculture, mining, construction and energy sectors. Turning to Q1 this year, early signs are upbeat. Inflation moderated in January, while remittances grew 63% annually, boding well for private spending. In other news, in late February, the government hiked the minimum wage by 10%, likely aiding personal consumption. That said, in early March, it also shuttered the country’s largest business association, boding poorly for investment. Moreover, relations with the West, Brazil and Colombia have worsened over the past month amid criticisms of the government’s crackdown on dissidents.
Nicaragua Inflation
Inflation decelerated to 10.9% in January (December: 11.6%). Meanwhile, the policy rate set by the Central Bank has stood at 7.00% since December. Inflation will decelerate this year as commodity prices moderate and global supply chain disruptions ease. However, local supply difficulties and second-round effects remain upside risks.