Speaking at a meeting of the Production, Trade and Consumption System (Sistema de Producción, Comercio y Consumo), Iván Acosta, the Minister of Finance and Public Credit said he was confident that with the official first quarter growth at 3.4%, there is no reason why Nicaragua’s economic growth couldn’t reach 4% for this year.
During his state of the economy address, Acosta said that the growth was good news for the population and an indication that Nicaragua was on the right path to economic recovery.
Acosta noted there had been domestic demand for hotel and restaurant services which resulted in signs of reactivation within that sector which will lead to more employment.
The minister said that more affiliates had been added to the INSS (Nicaragua’s social security system) which has been increasing every month. Acosta said that including the registrations for employees in May 2021, the total is 70,000 people added to the system since August 2020.
The Zona Francas (Tax Free Zones) are making a remarkable comeback with an increase in growth of 44% and US $1.147 Billion in exports. Not only is this good for direct employment, it provides a secondary level of related activity in and around the busy machine shops.
Acosta claimed that given the information so far this year on Nicaragua’s economic growth, he had every reason to believe that the second half of 2021 is going to be much better for the Nicaraguan economy.
Nicaragua’s Credit Rating
The credit risk rating agency Fitch Ratings seems to agree with Acosta’s assessment with a rating of Nicaragua’s long-term sovereign debt in national and foreign currency (Issuer Default Rating or IDR) at a B- and a revised outlook rating up from negative to stable. They also assessed the short-term sovereign debt in national and foreign currency at a B.
Fitch justifies the stabilization of the ratings due to “Nicaragua showing a higher-than-expected fiscal resilience and the signs of economic recovery from a prolonged period of economic contraction”. They also note the pandemic related “Multilateral Disbursements” that have eased short-term financing constraints.
