Nicaragua: Micro, small and medium enterprise development project
The Wordl Bank project supports the update of the Government’s Poverty Reduction Strategy under the National Human Development Plan, which has an emphasis on private sector development.
Sunday, March 30, 2008
During the past six years, Nicaragua has experienced macroeconomic stability with steady positive GDP growth, low inflation, stable exchange rates and declining interest rates. Foreign investment has climbed to levels not seen since the 1970s and annual GDP growth averaged 3.2 percent between 2001 and 2006. However, this level of economic growth is inadequate to ensure long term economic growth and poverty alleviation, and the sustainability of these positive tendencies is not clear. Growth in GDP per capita averaged only 2.1 percent between 2001 and 2006 and after remaining in the single digits between 2001 and 2005, consumer price inflation jumped to an estimated at 17 percent in 2007 (IMF), largely driven by high oil prices and the effect of Hurricane Felix.
Although Costa Rica continues to be regarded as a development success story, recent years have
seen the emergence of significant challenges for sustained economic growth and poverty reduction.
The IMF has indicated political polarization, high crime and outward migration, rising unit labor costs and high logistics costs, barriers to entry and expansion of business, fiscal uncertainty, and limited human capital.
The IMF noted the positive evolution of all the country's economic indicators, and the drastic fall in poverty, with an increase of 33% in per capita consumption.
The Central Bank has cut its growth forecast for GDP for the year to 4% - 4.5% and expects inflation to be between 6.55% and 7.5%, higher than initially expected.
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