Nicaragua is a poor country. The economy has grown since the low point of the 1990’s, but the low productivity, the large deficit in foreign trade, social polarization and corruption are serious structural problems. The economy has grown vigorously since 2010, but the protest year 2018 and the corona pandemic 2020 caused an economic downturn, the consequences of which are being painfully felt.
Gross domestic product: US $ 12.5 billion [2019]
Income per capita: US $ 1,919
Human development (HDI): Rank 126 (of 189) [2019]
Proportion of poverty: 41.2% (2017 FIDEG) or 24.9 (2016, INIDE)
Distribution of income (GINI index): 46.2 (2019, BTI)
Economic Transformation Index (BTI): Rank 93 (of 137) [2020]
The economy of Nicaragua has had strong growth of 4-5% per year since 2010. In 2015, gross domestic product (GDP) grew by 4.8% adjusted for inflation, by 4.7% in 2016 and by 4.9% in 2017. It should be noted that in these years growth was no longer consumed by the increase in population; GDP per capita grew by 5.7% in 2015, by 3.5% in 2016 and by 3.7% in 2017. The poverty indicators also improved, although Nicaragua has nevertheless remained one of the poorest countries in Latin America. The forecast for real GDP growth was still favorable for 2018: 4.7% was again expected. But the brutal suppression of the protest movement, which has gripped the whole country since April 19, 2018 (see below financial and economic situation; also chapter “History and State”), has led to a severe recession. In 2018 GDP fell by 4.0% and in 2019 it contracted again by 3.9%. For 2020, CEPAL has forecast a further decline of 5.9% due to the corona crisis, while the head of Central bank on June 9 of “4 to 4.5%” spoke.
The generation of the gross domestic product is divided into the following economic sectors: Agriculture: 17%; Mining 3%; Crafts and industry: 25%; Service: 55%. The share of agriculture is the highest in Central America. As one of countries in Central America according to franciscogardening, Nicaragua has been an agricultural country since colonial times, and it has remained so to this day. The most important export products are: beef, coffee, sugar, cheese, peanuts, beans, crabs and lobsters (order according to the amount of export earnings in 2018). The only exception is the export of gold, which temporarily took first place ahead of beef and coffee in 2013 due to the high world market price, but was again in third place in 2018. The extremely weak industrial base of the economy is only supplemented by the dynamic development of the free trade zones, which mainly produce textile products and auto parts for export. However, this industry is based on imported intermediate products and is only connected to the national economy through the use of cheap labor. The economy as a whole is not productive enough, and this is particularly true of the agricultural sector. The insufficient capacity of agriculture makes it necessary to import food again and again. In terms of imports of food are necessary again and again. In terms of imports of food are necessary again and again. In terms of Nicaragua’s labor productivity only reaches US $ 3,383 per capita (2013, GDP at 2010 prices) and thus takes by far the last place among the countries of Central America. Guatemala more than doubles and Costa Rica more than six times as much.
The good economy of the last ten years up to 2018 was due to the expansion of exports (opening up of new markets in neighboring Central American countries and in Venezuela) as well as the temporarily high world market prices for export goods. There has also been a significant influx of foreign direct investment into the communications, tourism and mining sectors. Larger projects with foreign participation are pending in power generation. Domestic demand has also expanded within certain limits, to which the expansion of employment and the government’s social programs have contributed.
However, the decisive structural deficits have remained. The trade balance shows a huge deficit every year: 2015: -2.5 billion US $, 2016: -2.5 billion US $, 2017: -2.4 billion US $. This deficit decreased to US $ 1.6 billion in 2018 and to US $ 1.1 billion in 2019, but this is only due to the decline in imports due to the economic recession. From a structural point of view, the trade balance deficit can only be balanced out by remittances from migrants abroad, inflows from external cooperation and income from tourism. Even after that, an annual current account deficit is the result. The national budget is in deficit and relies on donations and contributions from FC and DC. The underfunding of the state is causing dramatic deficits in the education and health systems as well as in the country’s economic infrastructure.
Economic facts and figures
The website of the Central Bank of Nicaragua contains the basic figures on the economic situation, export products and imports, services, informal shadow economy and agricultural production; here you can also find the brochure Nicaragua en Cifras (2019), the Statistical Yearbook 2018 and the Annual Report 2019. The report on external development cooperation and FC 2018 provides an overview of the contributions from development cooperation and FC.
Further data can be found in the CIA’s World Factbook and on UNICEF’s Nicaragua website. The Department of Commerce, Foreign Exchange, Inter-American Development Bank, and World Bank sites are also helpful.