Nicaragua’s economy is growing, but the poor may be falling behind
The International Monetary Fund (IMF)’s recent assessment of Nicaragua reinforces the narrative that the country has made tremendous strides in fighting poverty, but many experts stress the importance of staying vigilant against the country’s still deep inequalities and precarious economy.
The routine assessment of Nicaragua’s economy was conducted by a group led by the IMF’s head of mission to Nicaragua, Gerardo Peraza, last week. At the end of the visit, Peraza issued a statement that cast the economy in a pretty promising light.
“Notwithstanding challenging external conditions, economic activity remains buoyant,” Peraza said on the IMF website. The statement said economic growth is projected at 4.7 percent this year, supported by strong agricultural and commercial activity, while inflation is projected to moderate to below 4 percent given low food and other commodity prices.
Peraza also warned that the Central American country will be challenged “to maintain strong, sustainable and inclusive growth” as the face of global trade and economic activity grows less certain. Among several recommendations, the IMF urged Nicaragua to continue strengthening its public finances.
Nicaragua’s ongoing progress is often associated with its newly re-elected President Daniel Ortega. During his previous two terms in office, Nicaragua experienced stable economic growth and low rates of crime and violence compared to elsewhere in Central America. Ortega also helped many Nicaraguans out of poverty: between 2005-2014, poverty in Nicaragua decreased by 30 percent. Many of the country’s poor, who benefited from his social programs, supported his re-election.
In what was widely perceived as an official mark of the country’s renewed stability, the IMF even closed its office in Nicaragua this year, saying it was done helping the country reduce debt and poverty and get on the path to sustainable growth.
But many experts warn that Nicaragua’s progress needs to be kept in perspective. Nicaragua remains the second-poorest country in the Americas after Haiti and has the lowest level of GDP per capita in Central America. Roughly 40 percent of the population still lives in poverty, while in rural areas, the rate of poverty reaches nearly 60 percent.
And some analysts warn social inequality may again be on the rise. A survey published last Thursday by the Nicaraguan Foundation for Economic and Social Development found that a growing number of high-income Nicaraguans perceive improvements in their purchasing power, from 17 percent in March to 38 percent in October of this year.
“Meanwhile, the net balance of consumers in the [lower economic]strata decreased relative to that observed in June,” reads the report, “suggesting that these groups are more vulnerable to the rise in price levels.”
The roots of these deficiencies in the economy are debatable, but some experts have pointed to the country’s low quality of education. Nicaraguan teachers are the worst paid in Central America, earning less than 60 percent of the average wages for other jobs. And with a pitifully small portion of the national budget allotted to education, Ortega’s government has come under fire for not doing enough to improve it.
Informality in Nicaragua is also a top concern, as informal employment is associated with lower education, lower productivity and higher poverty levels. An estimated eight out of 10 Nicaraguans are self-employed and without steady income or social security, said Nicaraguan journalist and writer María López Vigil in a recent interview with Latin America Press, making it one of the biggest challenges in the country today.
“[And] migration to Costa Rica and Panama is massive,” López added. “The dollar remittances that migrants send to their families are an important support for the poorest people in the country.”
This immigration trend has sent waves of Nicaraguans to neighboring Costa Rica, searching for better paid work opportunities but doing little to strengthen the economy back home.
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