The World Bank In Nicaragua

Nicaragua is the largest country in Central America, covering 130,373 square kilometers. Its economy relies on producing light manufacturing, services, and agriculture. In recent years, Nicaragua has benefitted from foreign direct investment and remittances, which reached 8.3 percent and 20.6 percent of Gross Domestic Product (GDP), respectively, in 2022. 

The country has great potential for development, but it remains one of the region's poorest countries. While trade openness has increased, Nicaragua's exports consist mainly of low-complexity products. The country is highly vulnerable to external shocks and natural hazards. Its growth potential is limited by low levels of human capital, infrastructure gaps, and volatile business environment and quality of policy. However, the country has opportunities for growth by investing in human capital, improving access to basic services, support international trade, and adding value to manufacturing and services.

The GDP grew by 4.3 percent in 2023, driven by sectors such as electricity, mining, trade, construction, finance, transport, and communications. Consumption and investment also increased. In December 2023, the Monthly Index of Economic Activity (IMAE) showed a year-over-year increase of 5.5 percent. GDP growth is projected at 3.7 percent in 2024 and stabilize at 3.5 percent in the medium term.  

The employment rate reached 66.9 percent in the second half of 2023, close to pre-pandemic levels, due to sustained growth, lower inflation, and increased remittances. In December 2023, the employment rate for women significantly increased to 56.9 percent, but it remains substantially lower than the men's rate. Poverty, measured at US$3.65 per day based on the Purchasing Power Parities (2017 PPP), decreased from 13.1 percent in 2022 to 12.5 percent in 2023.

The macroeconomic outlook faces several risks, including natural disasters and geopolitical uncertainties that could drive up oil and food prices and economic downturns in major trading partners. El Niño has caused drought and extreme temperatures, reducing crop productivity and increasing food insecurity. This is impacting the Dry Corridor.

Last Updated: Apr 04, 2024

Nicaragua’s latest Country Partnership Strategy (CPF)  aims to address poverty reduction while promoting shared prosperity for more people.

Nicaragua’s 2018-2022 CPF focuses on investing in Nicaraguans' human capital- health, education, and skills- and in the private sector to create better-paying jobs.  It highlights working with young people, women, Indigenous populations, afro-descendant populations and in territories vulnerable to climatic shocks such as the Dry Corridor and the Caribbean regions.

The Strategy includes a mix of emergency and development investment projects (IPF), mostly financed by the International Development Association (IDA) and Trust Funds. Through the revised program, the World Bank Group's support focused on disadvantaged groups, job creation, and resilience for sustainability.

The International Finance Corporation (IFC), the World Bank’s private-sector arm, also plays a lead financing role in the agribusiness and financial sectors. 

The World Bank’s current portfolio in Nicaragua is US$294 million, including an additional grant of US$15 million provided by the Global Agriculture and Food Security Program (GAFSP). The areas of the portfolio are Health and Response to the emergencies of the Pandemic and the Eta and Iota hurricanes, which includes actions in fisheries, housing, access roads, resilient and nutrition sensitive agriculture.

Through the Global Agriculture and Food Security Program financing, the World Bank aims to enhance agricultural productivity and climate resilience, as well as support nutritional security in selected Nicaraguan municipalities of the Dry Corridor, and on the Caribbean Coast regions. 

Hurricanes Iota and Eta caused severe damage and loss of life in Nicaragua in November 2020, worsening the risks of COVID-19 transmission. In response, a credit of US$80 million was approved in 2021 to aid the country in meeting the urgent needs of the people, particularly those living in poverty and most affected by these tropical disasters.

To support Nicaragua's response to COVID-19, the Bank approved US$20 million in December 2020 and an additional US$116 million in 2022 to ensure access to COVID-19 vaccines. The projects aim to restore the health system to its pre-COVID situation in terms of essential services, medicines, vaccines, and medical and laboratory supplies and equipment.

Emergency projects in Nicaragua are implemented by the United Nations Office for Project Services (UNOPS), the Pan-American Health Organization (PAHO/WHO), and the Food and Agriculture Organization of the United Nations.

Last Updated: Apr 03, 2024

The Nicaragua Catastrophe Risk Insurance Project provides access to efficient insurance for sovereign risk associated with natural events, such as tropical cyclones, earthquakes, and excess rainfall. The Nicaraguan government has continually renewed its policies for earthquakes, tropical storms and excess rain. This insurance is currently one of Nicaragua’s main disaster risk financing instruments to provide short-term liquidity in the event of a disaster, allowing for immediate response while other financings can be mobilized. Nicaragua received $30.6 million in excess rainfall and tropical cyclone policies following Eta and Iota. This money provided short-term liquidity, allowing the government to respond to the emergency while securing other financing. 

A project in Nicaragua's rural areas from 2015 to 2019 helped over 14,000 people, mostly women, youth, and Afro-descendants, improve their access to nutritious food. The project used innovative agricultural and fishery techniques, training, and investments, resulting in a 78.25% increase in agricultural yields and over 8000 beneficiaries adopting new technologies.

The Caribbean Regional Communications Infrastructure Program promoted access to 3G mobile phone service and broadband internet with speeds exceeding 2Mbps in 16 communities along the Caribbean Coast and Río San Juan. These efforts have benefited 39,518 community members, with 450 receiving digital literacy training in Spanish, Mayangna, and Miskito. In addition, the program awarded 1,747 scholarships for English, 910 scholarships for soft skills, and 52 technical skills related to information technology. Further, two open innovation centers have been established in Puerto Cabezas and Bluefields, where young university students have developed nine applications under the guidance of mentors and following an open innovation methodology. Overall, ten digital innovation centers were established around the country.

Through the projects and Integrated Public Provision of Health Care Services, Nicaragua established plans to improve health care quality and prevent chronic diseases in the first level of care. The results highlight the training of 2,518 health workers, the creation and equipping of entomology rooms to prevent diseases transmitted by mosquito bites, and the establishment of hospital waste management plans in 34 of the 64 hospitals. 

In the past years, projects in roads (US$131.8 million), education (US$69 million), and land administration (US$50 million) have been completed successfully. Over 200 km of roads were built, rehabilitated, and maintained, and three key bridges were constructed to address climate change security and flooding issues. In the education sector, activities were implemented to enhance education quality through constructing and renovating school infrastructures, building capacity for teachers, introducing digital classes in 80 schools, and translating texts into several indigenous languages. Lastly, in Land Administration, the third project in a twenty-year intervention in the sector continued the integration of the property registry and cadaster, titling of properties, and demarcating protected areas. While progress has been made, further efforts are needed to complete the modernization of the property registry and cadaster in all 153 municipalities.

Last Updated: Apr 03, 2024