On June 22, 2017, the Executive Board of the International Monetary Fund (IMF) concluded the Article IV consultation with Nicaragua, and considered and endorsed the staff appraisal without meeting on a lapse-of-time basis.
",
"publishDate": "2017-06-26",
"sections": [
{
"heading": "Summary",
"content": "- On June 22, 2017, the Executive Board of the International Monetary Fund (IMF) concluded the Article IV consultation with Nicaragua and considered and endorsed the staff appraisal without meeting on a lapse-of-time basis.\n- Press Release No. 17/247."
},
{
"heading": "Macroeconomic performance (2016)",
"content": "- Real GDP growth: 4.7 percent in 2016.\n- Inflation (end-2016): 3.1 percent, largely influenced by food prices.\n- Private sector credit growth: 17.4 percent in 2016.\n- Bank soundness:\n - Non-performing loans: below 1 percent of total loans (end-2016).\n - Capital adequacy ratio: 13.5 percent of risk-weighted assets (end-2016).\n- Gross international reserves: US$2.3 billion at end-2016, with coverage of about 4 months of non-maquila imports."
},
{
"heading": "Fiscal sector (2016) and near-term stance",
"content": "- Tax revenues increased by 0.7 percent of GDP in 2016 due to advances in tax administration and full implementation of the 2012 tax reform.\n- Consolidated public sector (CPS) overall balance, after grants: -2.4 percent of GDP in 2016 (from -2.2 percent in 2015).\n- CPS deficit widened slightly to 2.4 percent in 2016 from 2.2 percent in 2015.\n- CPS debt ratio: 41.9 percent of GDP in 2016 (from 40.7 percent in 2015).\n- Drivers of spending pressures: election-related spending, expansion of public investment, and further deterioration of the financial position of the Social Security Institute (INSS)."
},
{
"heading": "External sector (2016)",
"content": "- Current account deficit: estimated at -8.6 percent of GDP in 2016 (compared with -9 percent in 2015).\n- Consolidation largely explained by maquila exports being better captured due to improvements in statistical compilation.\n- Current account financed by foreign direct investments (FDI) and other long-term inflows despite declining Venezuela cooperation inflows.\n- Gross reserves (reported elsewhere in indicators): US$2,296 million (2016)."
},
{
"heading": "Projections and near-term outlook (2017)",
"content": "- Real GDP growth projected: 4.5 percent in 2017.\n- Inflation projected: contained and anchored by the crawling peg at about 6 percent.\n- CPS deficit projected: about 2.3 percent of GDP in 2017, implying a broadly neutral fiscal stance in line with the authorities’ fiscal anchor.\n- Current account balance projected: about -8.5 percent of GDP."
},
{
"heading": "Executive Board assessment — findings and risks",
"content": "- Fiscal stance: broadly adequate to maintain macroeconomic stability in the near term, but fiscal buffers are needed to confront risks.\n- Key risks:\n - Growing INSS deficits and the need to take over social programs currently financed by Venezuelan cooperation are likely to intensify spending pressures in the next few years.\n - Potential impact of the NICA Act could be significant if it affects investment and growth, and rates on public debt.\n - Combination of a further reduction of Venezuela’s cooperation and lower IFI financing, in case of approval of the NICA Act, could put pressure on the FX market.\n - Vulnerability to spillovers from U.S. policies and to catastrophes/calamities/disasters (CCD) noted as risk factors."
},
{
"heading": "Executive Board recommendations and policy advice",
"content": "- Fiscal consolidation:\n - Staff recommends a fiscal consolidation of 1.6 percent of GDP, implemented over two years, to maintain fiscal sustainability in the medium term.\n - Suggested measures: primarily through a rationalization of subsidies and tax expenditures, particularly VAT exemptions.\n- Social security reform:\n - Priority to reform the INSS; INSS liquid reserves will be depleted by 2019, potentially increasing government transfers for pensions and health benefits.\n - Urgent action recommended using a combination of measures to improve sustainability, to the extent possible introduced gradually.\n- Medium-term fiscal policy:\n - Aim to improve resilience against potential external shocks and be more counter-cyclical given external risks.\n - Better monitoring of fiscal risks and improved oversight of state-owned enterprises (SOEs) recommended.\n- External and financial buffers:\n - Strengthen reserve position to reach the IMF’s suggested adequacy range given the exchange rate framework.\n - Banks should enhance liquidity, capital, and provisioning buffers to preserve financial stability against potential declining asset quality, higher interest rates, and lower remittances.\n- Supervision and regulation:\n - Address gaps in the supervisory perimeter; every deposit-taking and systemically important non-bank should be subject to effective risk-based supervision and AML/CFT oversight.\n - Strengthen regional financial regulatory cooperation.\n - Improve stress test methodology in line with best practices.\n - Publication: CBN continues to publish audited financial statements in accordance with the Safeguards Policy; implementation of IFRS remains in progress.\n- Liquidity management and financial markets:\n - Strengthen short-term liquidity management with focus on calibration, choice of instruments, and monitoring of liquidity developments.\n - Introducing a short-term policy rate and a corridor can reduce interest rate volatility, deepen financial markets, and provide some cushion against external shocks.\n - Careful weighing of the amplification of negative external shocks on output, competitiveness and exports against the price stability anchor of the crawling peg exchange regime.\n- Structural reforms to improve competitiveness:\n - Maintain investment in infrastructure.\n - Increase human capital development.\n - Address labor skills bottlenecks.\n- Data and statistics:\n - Further improve data quality and scope of macroeconomic statistics.\n - Continue strengthening base statistics, complete the rebasing of the national accounts, and increase data quality by applying IMF’s compilation methodologies."
},
{
"heading": "Selected economic indicators (2012–17) — key figures preserved from table",
"content": "- GDP growth (annual percentage change):\n - 2012: 6.5\n - 2013: 4.9\n - 2014: 4.8\n - 2015: 4.7\n - 2016: 4.7\n - 2017 (Proj.): 4.5\n- GDP (nominal, U.S.$ million):\n - 2012: 10,532\n - 2013: 10,983\n - 2014: 11,880\n - 2015: 12,748\n - 2016: 13,230\n - 2017 (Proj.): 13,942\n- Consumer price inflation (period average):\n - 2012: 7.2\n - 2013: 7.1\n - 2014: 6.0\n - 2015: 4.0\n - 2016: 3.5\n - 2017 (Proj.): 5.4\n- Consumer price inflation (end of period):\n - 2012: 6.6\n - 2013: 5.7\n - 2014: 3.1\n - 2015: 5.8\n - 2016: 3.1\n- Period average exchange rate (Cordobas per U.S.$):\n - 2012: 23.5\n - 2013: 24.7\n - 2014: 26.0\n - 2015: 27.3\n - 2016: 28.6\n- End of period exchange rate (Cordobas per U.S.$):\n - 2012: 24.1\n - 2013: 25.3\n - 2014: 26.6\n - 2015: 27.9\n - 2016: 29.3\n- Fiscal sector (percent of GDP, selected rows):\n - Consolidated public sector revenue (excl. grants): 2014–2016 entries include 25.4, 25.5, 26.3 (years aligned in original table).\n - Overall balance, after grants:\n - 2012: -0.8\n - 2013: -1.3\n - 2014: -2.0\n - 2015: -2.2\n - 2016: -2.4\n - 2017 (Proj.): -2.3\n- Money and credit:\n - Broad money: 2012: 15.4; 2013: 18.3; 2014: 19.0; 2015: 11.0; 2016: 10.8; 2017 (Proj.): …\n - Credit to the private sector: 2012: 20.2; 2013: 20.5; 2014: 17.4; 2015: 14.0; 2016: 11.7\n- External sector (percent of GDP):\n - Current account:\n - 2012: -10.7\n - 2013: -10.9\n - 2014: -7.1\n - 2015: -9.0\n - 2016: -8.6\n - 2017 (Proj.): -8.3\n - Capital and financial account:\n - 2012: 16.9\n - 2013: 14.4\n - 2014: 13.7\n - 2015: 8.8\n - 2016: 9.1\n - Gross reserves (U.S.$ million):\n - 2012: 1,778\n - 2013: 1,874\n - 2014: 2,147\n - 2015: 2,353\n - 2016: 2,296\n - 2017 (Proj.): 2,393\n - In months of imports excl. maquila:\n - 2012: 3.6\n - 2013: 3.7\n - 2014: 4.2\n - 2015: 4.6\n - 2016: 3.9\n- Public sector debt:\n - 2012: 41.5\n - 2013: 42.3\n - 2014: 40.2\n - 2015: 40.7\n - 2016: 41.9\n- Private sector external debt (percent of GDP):\n - 2012: 42.5\n - 2013: 45.1\n - 2014: 44.7\n - 2015: 44.9\n - 2016: 44.8\n - 2017 (Proj.): 42.6\n\nSource: Press Release No. 17/247 (June 26, 2017).\n\n---\n\n\n References\n\n- The Executive Board\n- PRESS CENTER\n- https://www.imf.org/en/home\n\nSource: https://www.imf.org/en/news/articles/2017/06/26/pr17247-imf-executive-board-concludes-2017-article-iv-consultation-with-nicaragua"
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"Published: June 26, 2017",
"On June 22, 2017, the Executive Board of the International Monetary Fund (IMF) concluded the Article IV consultation with Nicaragua and considered and endorsed the staff appraisal without meeting on a lapse-of-time basis.",
"Press Release No. 17/247.",
"Real GDP growth: 4.7 percent in 2016.",
"Inflation (end-2016): 3.1 percent, largely influenced by food prices.",
"Private sector credit growth: 17.4 percent in 2016.",
"Bank soundness:",
"Gross international reserves: US$2.3 billion at end-2016, with coverage of about 4 months of non-maquila imports.",
"Tax revenues increased by 0.7 percent of GDP in 2016 due to advances in tax administration and full implementation of the 2012 tax reform.",
"Consolidated public sector (CPS) overall balance, after grants: -2.4 percent of GDP in 2016 (from -2.2 percent in 2015).",
"CPS deficit widened slightly to 2.4 percent in 2016 from 2.2 percent in 2015.",
"CPS debt ratio: 41.9 percent of GDP in 2016 (from 40.7 percent in 2015).",
"Drivers of spending pressures: election-related spending, expansion of public investment, and further deterioration of the financial position of the Social Security Institute (INSS).",
"Current account deficit: estimated at -8.6 percent of GDP in 2016 (compared with -9 percent in 2015).",
"Consolidation largely explained by maquila exports being better captured due to improvements in statistical compilation.",
"Current account financed by foreign direct investments (FDI) and other long-term inflows despite declining Venezuela cooperation inflows.",
"Gross reserves (reported elsewhere in indicators): US$2,296 million (2016).",
"Real GDP growth projected: 4.5 percent in 2017.",
"Inflation projected: contained and anchored by the crawling peg at about 6 percent.",
"CPS deficit projected: about 2.3 percent of GDP in 2017, implying a broadly neutral fiscal stance in line with the authorities’ fiscal anchor.",
"Current account balance projected: about -8.5 percent of GDP.",
"Fiscal stance: broadly adequate to maintain macroeconomic stability in the near term, but fiscal buffers are needed to confront risks.",
"Key risks:",
"Fiscal consolidation:",
"Social security reform:",
"Medium-term fiscal policy:",
"External and financial buffers:",
"Supervision and regulation:",
"Liquidity management and financial markets:",
"Structural reforms to improve competitiveness:",
"Data and statistics:",
"GDP growth (annual percentage change):",
"GDP (nominal, U.S.$ million):",
"Consumer price inflation (period average):",
"Consumer price inflation (end of period):",
"Period average exchange rate (Cordobas per U.S.$):",
"End of period exchange rate (Cordobas per U.S.$):",
"Fiscal sector (percent of GDP, selected rows):",
"Money and credit:",
"External sector (percent of GDP):",
"Public sector debt:",
"Private sector external debt (percent of GDP):",
"[The Executive Board](http://www.imf.org/external/np/sec/memdir/eds.aspx)",
"[PRESS CENTER](http://presscenter.imf.org/)",
"[https://www.imf.org/en/home](https://www.imf.org/en/home)"
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