Caribbean & Central America - February 2016 (ISSN 1741-4458)

IMF report: On 28 January, the Executive Board of the International Monetary Fund (IMF) concluded the Article IV consultation with Nicaragua and issued a report which noted that “economic developments in 2015 have been broadly positive.” According to the IMF press release, after reaching 4.7% in 2014, growth is expected to moderate owing to the effects of a drought and the decline in commodity prices; real GDP grew by 3.9% in the first half of the year. Inflation declined to 3% in October, mainly reflecting declines in food and transportation costs. Core inflation remained stable at around 6.5%. The IMF press release notes “that the consolidated public sector deficit widened to 2% in 2014 (1.3% of GDP in 2013), largely due to a decline in grants originating from the oil collaboration with Venezuela. Nevertheless, the public debt ratio declined to about 41% of GDP in 2014 from 43% in 2013”. The IMF explains this improved fiscal position in terms of a “better performance at the central government level that has compensated for the deterioration in the fiscal balance of state-owned enterprises”. The IMF also highlights a sharp decline in poverty, citing the 2014 household survey as revealing that 29.6% of the population lives in poverty (42.5% in 2009), and 8.3% in extreme poverty (14.6% in 2009). It also notes that per capita consumption increased by 33%, helped by a fall in the average household size and a rise in per capita remittances. However, the IMF press release warns that education attainment remains a drag on growth and despite some improvement in primary school completion rates (from 74% in 2005 to 80.4% in 2010), “surveys of private firms suggest that labor skills remain a bottleneck to growth”.

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