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 benefited from foreign direct investment, at 6.7 percent of Gross Domestic GDP (GDP) with a slight decline from 2022, and remittances, which rose to 26.1 percent of GDP compared to 20.6 the previous year. 

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. In addition, the country is highly vulnerable to external shocks and natural hazards. Its growth potential is limited by low levels of human capital, infrastructure gaps, a volatile business environment, and quality of policy. However, the country has opportunities for sustainable growth by investing in human capital, improving access to basic services, strengthening access to international markets, and adding value to manufacturing and services.

The GDP grew by 4.6 percent in 2023, from 3.8 percent in 2022, driven by the growth in the services sector, particularly hotels, restaurants, and retail. Despite a slowdown in net external demand, remittances buoyed private consumption while improved economic expectations boosted investment. Growth slowed to 3.6 percent in 2024, with the monthly economic activity index growing 1.7 percent in June 2024, due to reduced production in fishing, livestock, agriculture, and manufacturing.

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. The employment rate for women (54.9 percent in June 2024) has increased in recent years but remains well below that for men (75.9). Poverty (US$3.65/day 2017 PPP) is estimated to have declined to 12.5 percent in 2023 from 13.1 percent in 2022. 

The macroeconomic outlook faces downside risks from exposure to natural disasters, volatility of food and oil prices, economic downturns in key trading partners, and tighter financial conditions. These factors could disrupt trade and external flows, leading to inflation that reduces purchasing power, higher unemployment, and poverty, as well as challenges for refinancing public debt. 

Last Updated: Oct 08, 2024

The latest Country Partnership Framework (CPF) with Nicaragua aims to address poverty reduction and promote shared prosperity that benefits people.

The 2018-22 CPF focuses on investing in human capital—health, education, and skills—and in the private sector to create better-paying jobs. It highlights working with youth, women, indigenous populations, and Afro-descendant communities, especially in areas vulnerable to climate crises, such as the Dry Corridor and the Caribbean coast.

The strategy includes a mix of emergency and investment projects financed primarily by the International Development Association (IDA) and trust funds. The revised program prioritizes support for vulnerable populations, job creation, and resilience for sustainability.

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

The current World Bank portfolio includes three investment projects financed (totaling US$ 276 million) in response to the COVID-19 pandemic and recent hurricanes. These activities focus on fisheries, housing, access roads, and subsistence agriculture. Additionally, two operations funded by grants (US$ 17.18 million) address food insecurity and improve nutrition-sensitive agriculture for the most vulnerable populations.

With financing from the Global Agriculture and Food Security Program, the World Bank seeks to improve agricultural productivity and climate resilience and support nutritional security in certain Nicaraguan municipalities in the Dry Corridor and Caribbean coastal areas.

In November 2020, hurricanes Iota and Eta caused significant damage and loss of life in Nicaragua, worsening COVID-19 transmission risks. In response, a US$ 80 million credit was approved in 2021 to help the country meet urgent needs, particularly for impoverished populations most affected by these tropical disasters.

In December 2020, the World Bank approved US$ 20 million to support Nicaragua’s COVID-19 response, and in 2022, it approved US$ 116 million to ensure access to COVID-19 vaccines. The projects aim to restore the health system to pre-COVID levels in terms of essential services, medicines, vaccines, and medical and laboratory supplies. 

In Nicaragua, emergency projects are implemented by the United Nations Office for Project Services (UNOPS) and the Pan American Health Organization (PAHO/WHO).

Last Updated: Oct 08, 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: Oct 08, 2024