Nicaragua Economic Outlook
After GDP growth slowed in Q4 last year, the early signs for Q1 are positive. In January–February, economic activity expanded at a sharper rate compared to the Q4 average. Improvements in fishing, mining, construction, energy and trade drove the readings. Moreover, remittances grew by over 60% in Q1, inflation moderated and the government hiked the minimum wage by 10% in February. That said, flatlining imports growth in the quarter points to weakening domestic demand. Turning to Q2, in April, inflation fell to single digits for the first time in a year, reducing pressure on real incomes. In politics, the Ortega regime’s crackdown on dissidents continues. After shuttering the country’s largest business association in March—boding poorly for investment—the National Assembly dissolved the local branch of the Red Cross in May, which will likely sour relations with the West further.
Inflation moderated to 9.5% in April (March: 10.4%). Price pressures will slow this year as demand cools and global supply-chain pressures ease. That said, fluctuations in commodity prices are a key factor to watch, while rigidities in local distribution networks and second-round effects remain upside risks.