Economy
Overview:
Prior to 1990, the Nicaraguan economy was not merely stagnant but declining
drastically. Interest rates soared to high levels, and many businesses crumbled.
In 1990, democracy was re-instituted with the election of Violeta Chamorro,
as president, but it wasn?t until the election of former Managua mayor, Arnoldo
Alem?, to the same post, that the nation grew at a fast clip. Gross domestic
product, or GDP, rates have climbed to their highest levels since 1977, more
than six percent. Nicaragua has always been an agricultural country, though
there is also room for export-based manufacturing, construction, tourism, mining,
energy generation and the sale of certain consumer products such as computers
and automobiles.
Prior to Hurricane Mitch in autumn 1998, Nicaragua had been pursuing a number
of impressive economic reforms and had begun to shed the legacy of a decade
of civil war and economic mismanagement by posting strong annual growth numbers.
The storm has put the reform effort on hold and has changed economic forecasts
for the future. Nicaragua, the poorest country in Central America, was one of
the hardest hit by the hurricane. It sustained about $US1 billion in damages.
Hardest hit was the all-important agriculture sector, which is responsible for
the majority of exports. As a result, the trade deficit was likely to balloon
in 1999 to about $US900 million. Significant aid has helped to stabilize the
country. In addition, the Paris Club and other creditors have offered substantial
debt relief. With the assistance of foreign aid and remittances of $US200 million
from Nicaraguans working abroad, the economy achieved real GDP growth of six
percent in 1999 while lowering inflation to 7.5 percent. Foreign currency reserves
stood at an unprecedented $US500 million at the end of October 1999.
A decision to allow more exports of fish from Nicaragua by the European Union
stands to benefit the nation?s trade. Nicaragua could export fish to all 15
of the EU members. Shipments of Nicaraguan sea products to the European countries
account for 10 percent of the nation?s exports, while the United States makes
up the other 90 percent.
Nicaragua was among the Central American economies to be hit by a drought in
2001. An estimated 1.6 million Central Americans face severe food shortages
because of the ongoing dry period, the effects of recent earthquakes and a drop
in coffee prices. Among coffee workers, the drought has increased unemployment.
Written by CountryWatch.com. Sources: Economic Commission of Latin America
and the Caribbean , the World Bank. For additional sources, please see Appendix
B of this review.
Economic Performance:
The real GDP decreased by 7.40 percent in 2000 compared to 6.10 percent in 1999.
The inflation rate decreased to 3.6 percent in 2000 from 4.13 percent in 1999.
The unemployment rate declined to 9.78 percent in 2000 from 10.2 percent in
1999.
In 2000, the GDP grew by 5.5 percent, which was lower than the 1999 figure.
The domestic demand contracted because of a decline in the private investment
in response to tight credit and high financial costs. There was an uncertainty
typically observed during an election year. The country?s economic growth is
thought to have brought about a reduction in unemployment from 10.7 percent
in 1999 to nine percent in 2000.
The public sectors? total outstanding external debt was estimated at $US6.65
billion for 2000, which was about $US150 million more than the year before.
To cover its external borrowing requirements, the government has relied primarily
on loans extended on highly concessional terms. Inflation is estimated to have
reached 9.2 percent, or two percentage points more than 1999. There was an increase
in the utility rates, shipping charges and prices for petroleum products and
building products.
Nicaragua signed a declaration with El Salvador and Guatemala, calling for the
establishment of a regional system for ensuring economic and social justice
and well-being, the formation of a customs union, the consolidation of the financial
system, the strengthening of the Central American sub-region and sustainable
development. The creation of an interoceanic, intermodal-shipping corridor is
also planned.
Written by CountryWatch.com. Sources: Economic Commission of Latin America
and the Caribbean, the World Bank. For additional sources, please see Appendix
B of this review.
Balance of Payments:
The current account deficit was cut to $US990 million. The deficits on the services
and income accounts were, for all intents and purposes, unchanged. The merchandise
trade deficit - 42 percent of GDP - narrowed by 7.5 percent as the value of
imports held more or less steady and exports rebounded. The total exports of
goods, including net exports, rebounded. The total exports of goods, including
net exports of firms operating in the free-trade zone, amounted to $US690 million.
This increase was led by higher sales of traditional products, such as coffee,
sugar, bananas, lobster and shrimp, as well as of some nontraditional exports,
including peanuts, cheese and cattle.
The higher value of imports like oil, fuels and lubricants played an important
role in shaping the trend in the value of imports, since owing to the slowdown
in economic activity, imports of other raw materials and capital goods were
sharply lower and imports of consumer goods were virtually flat.
Written by CountryWatch.com. Sources: Economic Commission of Latin America
and the Caribbean, the World Bank. For additional sources, please see Appendix
B of this review.
Regional Situation:
Nicaragua would not be helped by the slowing of the world economies and increasing
coffee prices. However, it would benefit from increased efforts to promote trade
within its region and around the world.
Nicaragua
Macroeconomic Activity
Real GDP Per Capita
|
1996 |
1997 |
1998 |
1999 |
2000 |
|
|
Real GDP |
10,212 |
10,711 |
11,234 |
11,704 |
12,390 |
|
Total Population |
4.384 |
4.493 |
4.600 |
4.706 |
4.813 |
|
Real GDP Per Capita |
2,329 |
2,384 |
2,442 |
2,487 |
2,575 |
|
Sources: |
US CIA World Factbook, IMF World Outlook, |
Global Ranking
|
Gross Domestic Product |
Population |
GDP Per Capita |
||||
|
Country |
Rank |
2000 |
Rank |
2000 |
Rank |
2000 GDP |
|
Nicaragua |
105 |
12,390 |
110 |
4.813 |
112 |
2,575 |
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