Nicaragua: External financing needs drive risk

Growth stable and prices anchored

The trend that saw real GDP growth in Nicaragua outperform regional peers for the past 5 years is slowing. In 2017, we expect real GDP to grow by +4.3%, down from +4.7% in 2016.  Inflation is expected to edge up to +3.6% in 2017 and pick up in 2018 as food prices rise. The crawling peg against the dollar has anchored inflation expectations and guaranteed competitive access to Nicaragua's largest export market: the U.S. Real Effective Exchange Rate data (REER) reveals the Nicaraguan Cordoba is stable and not overvalued. Import cover hovers around 4 months.