COVID-19 to compound Nicaragua’s economic woes

Subject

Economic troubles.

Significance

Nicaragua’s economic activity has contracted sharply since the outbreak of civil unrest in 2018. Social tensions, political gridlock and business uncertainty have weighed heavily on investment and consumption, driving unemployment and capital outflows. A severe tightening of available financing due to sanctions and plummeting public revenues has forced the government to cut spending, exacerbating the downturn. Nicaragua so far appears to have avoided the worst of the global COVID-19 pandemic, with only a handful of confirmed cases to date. However, an alarming lack of preventative action increases contagion risks both nationally and regionally and will threaten economic activity in the medium term.

Impacts

• Government inaction on COVID-19 will exacerbate the public-health impact, potentially resulting in a substantial death toll.
• Washington will not ease sanctions in light of COVID-19 and may instead redouble efforts to force governmental change.
• The exchange rate will continue to weaken, posing a threat to the dollarised economy.