12 de febrero 2025
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The International Monetary Fund (IMF), in its February 2025 report, highlighted Nicaragua's “robust” economic growth, mainly due to “very strong” remittance flows. In addition, it affirmed that the Nicaraguan economy “continues to be open and resilient” in a context of international sanctions. However, the report also emphasized the need to significantly strengthen Nicaragua's rule of law and safeguard judicial independence.
In November 2024, the IMF had already endorsed –once again– the Ortega regime's management of Nicaragua's economy, although on that occasion they also took the opportunity to warn about the need to “significantly improve the rule of law and safeguard judicial independence to support investors.”
The IMF made the November statements on the day the Ortega dictatorship presented its proposal to “reform” the Political Constitution. The essentially new Constitution eliminates the independence of State powers and the separation of branches of government, and strips citizens of all their democratic rights and guarantees. The IMF did not, however, refer directly to the reform proposal.
“Recent actions affecting property rights and reactions to international sanctions may hinder investment decisions,” the IMF warned in November.
In its February 2025 report, issued at the conclusion of the 2024 Article IV consultation with Nicaragua, the IMF executive board indicated that “Nicaragua's economic performance remains robust, supported by prudent macroeconomic policies and very strong remittance flows.”
Nicaragua received a new record of $5.24 billion in family remittances in 2024, representing 29.4% of its gross domestic product (GDP), with $4.34 billion coming from the United States, according to the Nicaraguan Central Bank.
“The economy remains open and resilient, in a context of private property transfers to the state, international sanctions and redirection of official financing flows,” the IMF said.
The agency noted that Nicaragua's real GDP growth accelerated to around 4.5% in 2023 and the first half of 2024, from approximately 3.8% in 2022, “thanks to vigorous domestic demand as inflation declined.”
“Fiscal and treasury account surpluses are leading to a decline in the public debt-to-GDP ratio as well the accumulation of abundant buffer reserves,” the IMF stated.
Forecast of 4% GDP growth in the short term
The IMF projected that Nicaragua's GDP growth will be around 4% in the short term and 3.5% in the medium term, “amid a slower pace of remittance growth, a limited contribution by the labor force due to recent emigration, and cautious decisions by private sector investment.”
The IMF also expects international reserves to grow at a slower pace than in the recent period, with a reduction in the fiscal and treasury account surpluses as the authorities increase public investment.
Risks to the outlook are broadly balanced in the near term, with an increase in downside risks in the medium term, the IMF explained in its report.
According to the report, upside risks to the outlook include increasing demand, while downside risks include slower global growth, a deterioration in the terms of trade, natural disasters, tighter and broader international sanctions, and a change in U.S. immigration policies.
“Moreover, going forward, domestic and international political developments and the deterioration of the rule of law may also impact economic performance as they could raise the costs of doing business,” the report warned.
According to the report, IMF executive directors concurred with the staff's assessment, welcoming Nicaragua's robust growth, reduced inflation and public debt, and fiscal and treasury account surpluses, supported by prudent macroeconomic policies and high remittances.
Warnings of downside risks, including migration
Directors insisted that there are downside risks, including natural disasters, international sanctions and U.S. immigration policies. They stressed the importance of continuing efforts to safeguard macroeconomic stability, strengthen buffers and support higher and more inclusive growth.
The directors also pointed out vulnerabilities, encouraged proactive provisioning for assets at risk and non-performing loans, close monitoring of consumer credit growth, strengthening foreign exchange risk monitoring, and aligning the crisis preparedness framework with international best practices.
They also called for efforts to improve the business climate, strengthen institutions and the governmental framework to support increased private investment.
Similarly, the directors took note of the measures taken to improve governance, anti-corruption and anti-money laundering and combating the financing of terrorism frameworks, and stressed that further efforts are needed to ensure their effective and appropriate implementation.
The next Article IV consultation with Nicaragua is expected to be held in the regular 12-month cycle.
*With information from EFE
This article was originally published in Spanish by Confidencial and translated by our staff. To get the most relevant news from our English coverage delivered straight to your inbox, subscribe to The Dispatch.
