Nicaragua: 2025 Article IV Consultation-Press Release; and Staff Report

The 2025 Article IV Consultation discusses that the Nicaraguan economy weathered well multiple shocks since 2018, supported by appropriate macroeconomic and financial policies, substantial pre-2018, and financing from international financial institutions (IFIs) during the pandemic. Strong fundamentals—low inflation, a declining public debt-to-gross domestic product ratio, twin fiscal and external surpluses, well capitalized banks, and sizeable buffers—should help Nicaragua withstand headwinds from ongoing shifts in the global policy landscape. Risks are tilted to the downside in the medium term, including from natural disasters, commodity price volatility, weaker global growth, tighter US immigration and trade policies, and stricter and wider international sanctions. Continued prudent fiscal, monetary, and financial policies will help maintain macroeconomic and financial stability, preserve fiscal sustainability, and strengthen policy buffers. For higher medium-term growth and further progress on poverty reduction, it is crucial to increase public investment, human capital accumulation, and targeted social spending; support the integration of returning migrants in the labor market; and diversify exports, while strengthening frameworks, the business climate, and significantly improving the rule of law.