This essay will examine how the political crisis impacts on the economic development by analysing some of the characteristic numbers of the Nicaraguan economy. First it will explain poverty and inequality which are one of the main problems in the country. Then, it will focus on economic growth and the importance of the tourism sector. After that it will take a short look at Nicaragua’s performance in the GCI.
Earlier this year Nicaragua was named “The other Venezuela of Latin America” by the economic newspaper Portafolio due to its economic crisis which is the worse of the last thirty years caused by socio-political and humanitarian conflicts. Although Nicaragua is considered one the poorest country in Latin America it had one of the fastest-growing economies. Since April 2018, Nicaragua has been in a severe crisis. After the violent suppression of pro-tests against a social security reform, 325 people died, more than 2000 were injured and about 800 people were arrested. Furthermore, around 70.000 people left the country – most of them are fleeing south for Costa Rica. International human rights organizations accuse the state of systematic and serious human rights violations. The government rejects the accusations and accuses its opponents of a political campaign.
According to its constitution, Nicaragua is a presidential democracy with a one-chamber parliament. Daniel Ortega has been president since 2007. After the Sandinista revolution against the dictator Anastasio Somoza in 1979, he ruled the country authoritarian for eleven years with a social reform agenda. Government, administration, judiciary and the ruling party Frente Sandinista de Liberación Nacional (FSLN) are closely intertwined. The 2016 elections took place without international election observation. The international community is engaged in various ways to reform the electoral system and fully restore the rule of law and civil liberties.
Table of contents
1. Introduction
2. Poverty
2.1. Poor and extremely poor people
2.2. Expected situation for the future
3. Inequality
3.1. Gini index
4. Economic growth
4.1. Development of the GDP
4.2. Sectors
4.3. Development of credit rating
4.4. Inflation
4.4.1. Córdobas exchange rate
5. Tourism
6. GCI
7. Conclusion
Objectives and Research Themes
This paper examines the impact of the ongoing political crisis on the economic development of Nicaragua by analyzing key macroeconomic indicators and structural challenges. The research aims to assess how instability influences poverty rates, economic growth, and the competitiveness of the country.
- Analysis of poverty trends and income distribution
- Evaluation of economic growth and sectoral performance
- Assessment of the role of the tourism sector
- Examination of Nicaragua's international competitiveness (GCI)
Excerpt from the book
4. Economic growth
Since 2010, Nicaragua's economy has shown strong growth of 4-6% per year. In 2015, the GDP grew by 4.8% adjusted for inflation, by 4.7% in 2016 and by 4.9% in 2017. It should be noted that growth is no longer absorbed by population growth; GDP per capita grew by 3.4% in 2015, 3.2% in 2016 and 3.4% in 2017 (figure 1).
The forecast for real GDP growth was also favourable for the year 2018: 4.7% was again expected. But the protest movement that has swept the whole country since 18 April 2018 has led to economic losses. The annual report of the central bank has calculated a decline in GDP of 3.8%. In other words, economic development was worse than expected.
The government's tax revenues declined by 6.1% for the year as a whole. Exports were able to roughly maintain their level, but foreign direct investment in the country halved and capital flight is an acute problem. Migrants' remittances abroad increased by 7.9%. Income from tourism slumped in 2018 from US$ 924 million (2017) to US$ 544 million (2018). Domestic economic life is going through a severe crisis. Many people have lost their jobs and poverty and hunger are spreading. According to the independent foundation FUNIDES, 453,000 employees have been made redundant. The current development in 2019 is difficult to understand in detail, as important and sensitive data are apparently withheld by the central bank for political reasons.
Summary of Chapters
1. Introduction: Provides an overview of Nicaragua's socio-political situation and its economic context as the country navigates a severe crisis.
2. Poverty: Examines the development of poverty rates and the disparity between national, urban, and rural population segments.
3. Inequality: Analyzes income distribution using the Gini index and compares Nicaragua's status with other Central American nations.
4. Economic growth: Discusses GDP development, sectoral contributions, credit ratings, and inflation in the context of recent instability.
5. Tourism: Evaluates the importance of the tourism sector and the negative impact of the 2018 unrest on foreign visitor numbers and revenue.
6. GCI: Assesses Nicaragua's international competitiveness based on the Global Competitiveness Index (GCI) 4.0 rankings.
7. Conclusion: Summarizes how political instability has hindered economic progress and emphasizes the need for political stability to foster recovery.
Keywords
Nicaragua, Economy, GDP, Poverty, Inequality, Gini index, Inflation, Tourism, Economic Crisis, Political Unrest, GCI, Central America, Development, Credit Rating, Trade Balance
Frequently Asked Questions
What is the primary focus of this paper?
The paper provides an economic analysis of Nicaragua, specifically focusing on the impact of the socio-political crisis that began in 2018 on the country's development.
What are the core thematic areas discussed?
The core themes include poverty trends, income inequality, sectoral economic performance, GDP growth, tourism, and the country's performance in the Global Competitiveness Index.
What is the central research objective?
The objective is to analyze how the political crisis has negatively affected the economic trajectory and social well-being of the Nicaraguan population.
Which research methods are employed?
The paper utilizes a descriptive and analytical approach, synthesizing secondary data from international organizations like the World Bank and local foundations like FUNIDES.
What does the main body cover?
The main body systematically explores macroeconomic indicators, including poverty statistics, GDP growth rates, credit ratings, inflation, and the decline of the tourism industry.
Which keywords characterize the work?
The work is characterized by terms such as economic crisis, political instability, poverty, GDP, and competitiveness.
How has the political crisis affected the tourism sector?
The crisis caused a sharp slump in tourism revenue, dropping from US$ 924 million in 2017 to US$ 544 million in 2018, leading to significant job losses.
What does the GCI analysis reveal about Nicaragua's standing?
The GCI analysis shows that Nicaragua performs poorly, ranking 109th in the 2019 report, which places it behind its neighbors and indicates a decline in competitiveness.
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- Julia Mueller (Autor:in), 2019, Economy of Nicaragua. How the political crisis impacts the economic development, München, GRIN Verlag, https://www.grin.com/document/992425
