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Prior to 2018, Nicaragua’s economic growth was supported by market-oriented reforms, sound macroeconomic management anchored in a crawling peg exchange rate regime and prudent fiscal policy, and a growing labor supply.

Between 2000 and 2017, growth averaged 3.9 percent, led by domestic demand fueled by remittances and Foreign Direct Investment (FDI). A small, open economy that depends on agriculture and light manufacturing, Nicaragua has not been able to further boost growth and per capita incomes as low human capital, large infrastructure gaps and a weak institutional and business environment undermine its long-term growth.

The sociopolitical crisis of 2018-2019, followed by the COVID-19 pandemic and two major hurricanes in 2020, resulted in a cumulative GDP loss of 8.7 percent, while poverty ratcheted up to 16 percent by end-2020. The economic impact of the pandemic was limited due to mild containment measures and strong remittance inflows. Nonetheless, voluntary shutdowns weighed on domestic demand, while the global crisis reduced external demand in 2020. Large-scale public investment (supported by government deposits), external financial assistance, and strong export demand helped Nicaragua recover from the impacts of these multiple shocks. Real GDP rebounded strongly by 10.3 percent in 2021, recovering to pre-2018 levels. However, welfare impacts from the pandemic lingered as around 10 percent of formal employees in 2019 transitioned to an informal sector by end-2021. Lower employment and wages reduced family incomes of 28 percent of households.

Despite high inflation, global headwinds, and the damage caused by Hurricane Julia, GDP is expected to have grown by 4.0 percent in 2022. This expansion was driven by robust private consumption fueled by remittances, as well as net exports. On the supply side, the economic expansion was broad-based, and driven by services. Remittances expanded sharply during 2022, reaching about 22 percent of GDP due to a spike in emigration. As a result, despite weak employment growth and high inflation, poverty (US$3.65/day PPP) is estimated to have declined to 13.3 percent in 2022 from 14.2 percent in 2021.

In 2022, the average annual inflation in Nicaragua surged to 10.5 percent - the highest among Central American countries and more than double the average inflation rate over the past decade. Inflation was driven by strong domestic consumption and higher import prices caused by pandemic-related supply chain disruptions and Russia's invasion of Ukraine.

Growth is projected to moderate to 3 percent in 2023 amid fiscal consolidation, slowing external demand, and elevated inflation. Slower growth, high food prices and fiscal consolidation are likely to curb reductions in poverty and inequality in the medium term.

The World Bank has supported poverty reduction measures in Nicaragua through the  International Development Association (IDA), the World Bank’s fund for the poorest countries. To reach the country’s vulnerable families better, IDA projects leverage local initiatives that stretch limited resources further and deliver sustainable results.

Last Updated: Apr 04, 2023


Nicaragua: Commitments by Fiscal Year (in millions of dollars)*

*Amounts include IBRD and IDA commitments
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Country Office Contacts

NICARAGUA +505 2270 0000
5to. piso Edificio Cobirsa, Km 6,5 carretera a Masaya, Managua
USA +1 202 473-1000
1818 H Street NW, Washington, DC 20433