The Central Bank of Nicaragua Ups Its Economic Growth Forecasts for 2023
Despite a slowdown in the global economy, the Central Bank of Nicaragua (BCN) has once again raised its growth forecasts for this year, projecting a range of 4 to 5 percent by the end of 2023. The BCN also predicts that the growth rate will be maintained into the following year.
In a recent update, the BCN, which operates under Daniel Ortega’s regime, reported that the Nicaraguan economy has performed better than expected and has remained on a path of sustained growth, surpassing cyclical fluctuations. This positive momentum has been observed through the latest IMAE data as of September, driven by the strength of all sectors, particularly the primary sector and services.
While the monetary authority’s initial forecast placed the range of GDP expansion between 3 and 4 percent, the BCN has now raised the ceiling to 5 percent. However, the International Monetary Fund (IMF) projected a growth rate of 4 percent for Nicaragua in a recent visit.
Looking ahead to 2024, the BCN estimates that the economy will expand between 3.5 and 4.5 percent. The IMF expects real GDP to grow around 3.5 percent in 2024 and in the medium term, primarily supported by private consumption.
According to the BCN, GDP had grown 3.8 percent in the first half of 2023. This growth was attributed to activities such as hotels and restaurants, mining and quarrying, electricity, transportation and communications, financial intermediation, commerce, and construction. The BCN emphasizes that internal demand, especially growth in consumption and investment, contributed to the GDP growth.
Despite the economic growth, the BCN admits that the improvement shown is not producing enough jobs, although it highlights that the unemployment rate remains low, standing at 3.5 percent as of September. However, the labor market remains behind the pace of economic activity, reflected in lower labor participation compared to pre-pandemic levels.
The BCN also pointed out positive signs of a gradual slowdown in inflation, which stood at 6 percent year-on-year in October. Additionally, the financial intermediation has shown improvement, noted through an increase in credit activity and growth of public deposits.
The banking and financial system’s liquidity and solvency indicators remain healthy, thanks to the positive impact of economic activity on the payment capacity of households and companies. Furthermore, the public sector’s balance sheets remain balanced, showing growth in tax revenues and a prudent public spending policy.
With these positive indicators, the Central Bank of Nicaragua is paving the way for a more optimistic economic outlook for the country.