21 de marzo 2022
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The president of the Central Bank of Nicaragua (BCN), Ovidio Reyes, assured on March 15th that the country's gross domestic product (GDP) grew 10.3% in 2021. Shortly after, the Minister of Finance and Public Credit, Ivan Acosta, confirmed the data.
The statements of both officials of the Ortega dictatorship, occurred during the ceremony in Managua for the opening of the new headquarters of the Central American Bank for Economic Integration (CABEI), which seals the relationship between the Nicaraguan president, and the executive president of that regional entity, Dante Mossi.
"The year 2021 was one of economic recovery and the return to growth of the Nicaraguan economy, after it was affected by various shocks since 2018 and the covid-19 pandemic at the beginning of 2020," said Reyes. He noted that preliminary estimates indicate that the accumulated growth of GDP during 2021 will be around 10.3%, after -2% in 2020.
This growth is supported by the data from the Monthly Report on Economic Activity (IMAE), according to which, "the sectors with the highest accumulated growth during the year were mining and quarrying (40.6%), construction (35.5%), commerce ( 16.1%), manufacturing industry (13.7%) and hotels and restaurants (10.5%)”.
Reyes said the data compiled by the official government economists suggest that the country returned to the path of growth. He further noted that the performance of the fourth quarter of 2021 was similar to that observed in the first quarter of 2018.
The second is the forecast that in 2022, the economy will grow between 4.0% and 5.0%, as long as the growth projections for private investment and exports are met, and for construction, commerce and manufacturing.
The Central Bank forecasts that inflation will close the year at between 5.0% and 6.0%, showing a slight acceleration during the first semester, and moderate in the second.
As to challenges, Reyes said that "fears persist of possible new variants of covid-19 that could prolong interruptions in global supply chains," and that geopolitical tensions can drive oil prices higher as well as other raw materials, "which poses inflationary risks and impacts that would affect supply and demand globally."
In terms of opportunities, food exports are expected to continue to grow, both in terms of volume and price, and the country will benefit from the relocation of value chains, which US companies are bringing from Asia to the Americas, a phenomenon called 'nearshoring', "which could lead to greater direct foreign investment, exports and job creation," expects the BCN.
Squeezing taxpayers
The growth announced for 2021 would be accompanied by a 26.5% increase in tax collection by the Central Government, which Reyes justified with the dynamism of economic activity. This, despite the fact that both independent economists and businessmen have continuously rejected the effects of the 2019 tax reform, as well as the fiscal harassment they suffer, which results in an increase in the payments they make to the State.
“The deficit of the Non-Financial Public Sector was reduced to 1.5% of GDP in 2021 versus 2.5% in 2020. Likewise, public debt was reduced to 64.2% of GDP versus 64.8% in 2020, and maintained sustainable levels, which contrasts with what is observed in most economies”, which increased their deficits and their public debt, said Reyes. His statement ignored that many countries launched support programs for companies, while the Ortega Administration focused on denying the risks of the pandemic, and left entrepreneurs to their fate.
According to the BCN the performance of 2021 made possible a reduction in the unemployment rate, which Reyes placed at 4.3% in the third quarter of last year. He based the claim on data from the Nicaraguan Institute of Information for Development (Inide). Meanwhile, he said the number of affiliates with the Nicaraguan Institute of Social Security, increased by 46,748 contributors during 2021, which is 6.5% higher than what was observed in December 2020.
On the other hand, the combination of external and internal factors caused inflation to rise to 7.21%, which exceeds the 2.93% rate measured in 2020, said Reyes.
“The global economic recovery” favored the increase in external flows, particularly due to merchandise exports, (23.1% last year, versus 5.8% in 2020); and those of free trade zones, (36.8% in 2021, against 14.7% in 2020). Family remittances increased by 16% (10% in 2020), and direct foreign investment showed a tendency to recover, especially in the energy and mining and telecommunications sectors.
Reyes said that “revenues from tourism reflected a quarter-on-quarter recovery, although in the aggregate for the year they decreased 7.4%”, after falling 61.5% in 2020, “due to the restrictions associated with the pandemic.”
Finally, he pointed out that Nicaragua’s Gross International Reserves totaled 4.046 billion dollars at the end of 2021, “which represented an increase of 834.7 million dollars compared to 2020 and the equivalent of a coverage of 2.8 times the monetary base, an adequate level that supports the stability of the current exchange rate.
This article was originally published in Spanish in Confidencial and translated by Havana Times
