Nicaragua Economic Outlook
Annual economic growth picked up to 3.5% in Q1, and monthly data points to another acceleration in Q2. Economic activity growth picked up to 3.9% on average in the quarter, buttressed by sturdier activity in agriculture and a sharp rebound in construction, likely thanks to the start of a Chinese-backed housing project in April. On the flip side, retail activity eased slightly, dented by weaker growth in remittances during the period. Moreover, merchandise exports swung into contraction. In other news, in late August, the country signed a free trade agreement with China. The accord is set to come into force in January 2024 and will enhance goods and services trade, as well as investment access. Additionally, the two countries agreed on an electronic transaction framework and digital economy cooperation.
Inflation fell to 7.5% in August from 8.2% in July. The deceleration was chiefly driven by softer price pressures for food. Inflation will average lower this year than last due to the normalization of global supply chains and softer external price pressures. That said, it will remain elevated due to the government’s fuel policy and inefficient local distribution networks.