The International Monetary Fund (IMF) Executive Board has completed its Article IV consultation with Nicaragua, evaluating the country's economic status and future projections. Nicaragua's economy continues to perform well, supported by strong remittance flows and prudent macroeconomic policies. The economy is projected to grow at 4% in the near term before slowing slightly to 3.5% in the medium term.
The IMF notes that Nicaragua has experienced robust GDP growth of approximately 4.5% in recent years, driven by domestic demand, with inflation decreasing. However, risks such as international sanctions and U.S. immigration policies pose potential challenges. "Executive Directors agreed with the thrust of the staff appraisal," indicating a consensus on current assessments.
Efforts are needed to maintain fiscal sustainability while supporting growth through increased public investment and strengthening fiscal transparency. The IMF emphasized that "Directors welcomed the authorities’ commitment to preserving fiscal sustainability." They also highlighted prudent debt management due to limited concessional financing availability.
Monetary policy should remain focused on price stability and maintaining exchange rate regimes. The Central Bank of Nicaragua is encouraged to adjust policies as needed, enhance communication, and improve monetary policy transmission. Financial stability measures were also noted as critical.
To promote long-term growth, it is important for Nicaragua to invest in human capital and enhance labor force participation, particularly among women. Strengthening government institutions and improving governance frameworks are seen as crucial steps forward.
Overall, the IMF stresses ongoing efforts towards enhancing climate resilience and promoting higher medium-term growth while acknowledging existing vulnerabilities within Nicaragua's economic landscape.