Economic Context 2016 August 2016 Eduardo Camilo Pacheco Main Economist on Social and Sectoral Issues

Economic context 2016 Content I. Domestic economic context II. Forecasting 2016-2017 III. Funides surveys

If Nicaragua keeps growing at the same rate of 2015, it would take 124 years to reach the GDP of Costa Rica

If a constant growth rate is assumed into the next 20 years, Costa Rica would have a GDP of US$109 billion while Nicaragua a GDP of US$32 billion.

However, if Nicaragua duplicates its growth rate, it would take only 26 years to have the same GDP as Costa Rica.

International Economic Context

The world economic growth has been moderate and unequal The world economic growth has been moderate and unequal. It's expected that China will have an economic growth above 6% on 2016 and 2017, while the economic growth expectations of Europe and USA are 2.3% and 1.5%, respectively. Finally, in LA are expected a contraction during 2016 and growth of 1.6% during 2017.

During 2016, the prices of beef and coffee will experience falling During 2016, the prices of beef and coffee will experience falling. On the other hand, the prices of gold and sugar will increase in 7.6% and 26.6% in the same period. In 2017, an increasing in the prices of coffee, beef and gold is expected.

Domestic Economic Context

During the first quarter of 2016, the GDP had a increase of 4. 8% During the first quarter of 2016, the GDP had a increase of 4.8%. Indeed, this rate is greater than MIEA growth, which was 4.6% during the same period. Moreover, MIEA had a growth rate of 5.2% on the second quarter of 2016.

During June, fishing, financial intermediation and agriculture were activities with greater economic growth in the domestic economy.

In June, agriculture, trade and livestock were the activities with greater contribution to MEIA growth. Overall, these activities represented the 58.8% of MEIA growth rate.

Inflation has shown an increasing trend throughout the first 7 months, but keeping relative low levels.

During July, alcoholic beverages and tobacco, education, recreation and culture, and hotels and restaurants presented the greater inflation rates.

In May 2016, the affiliates of INSS have grown 12 In May 2016, the affiliates of INSS have grown 12.3% than the same period of 2015. The activities with greater growth were construction, transport and communication, and financial intermediation.

Domestic Economic Context External sector

Until June of the current year, the balance of trade shows a deficit of US$1,182 million, which represents a 17.2% of GDP. This deficit is greater than the one observed during the same period of 2015.

The exports were US$2,461 million at June 2016, being slightly lower than same period of the previous year. On the other hand, imports were US$3,643 millions, 4.4% greater than the same period of 2015. Caída de precios y volumen de nuestros principales productos, solamente el café presentó aumento en volumen.

The real exports had increased 2. 7% in June 2016 The real exports had increased 2.7% in June 2016. During the same period, the merchandise exports have decreased 6.1%, and the free zone exports have increased 11.4%.

The exports of bananas, sea shrimp, and lobster have the greater growth rate at June. However, the exports of these goods together represent less than 10% of merchandise exports.

The real imports grew 10.4% in June 2016 as a result of the increase on 10.8% of merchandise imports, and the increase on 8.9% of the imports related with free zone activities.

Remittances were US$609 million during June 2016, being 4 Remittances were US$609 million during June 2016, being 4.6% greater than the same period of 2015. However, this growth is not that important as percentage of GDP due to a greater acceleration experienced by the latter during the same period.

Domestic Economic Context Public sector

The balance of the central government, after grants, showed an improvement in June over the same month of 2015.

In constant terms, IT and VAT have presented an increase above 5% In constant terms, IT and VAT have presented an increase above 5%. This improve the central government tax revenues around 9.1% in comparison with the same period 2015. excise tax

The expenditure of the central government increased as percentage of GDP as a result of increasing in the current and capital expenditures.

The balance of INSS showed a deficit, after grants, as result of a reduction into social contributions.

Domestic economic context Financial indicators

After the negative trend observed during the first months of the current year, the growth rate of real deposits of private sector showed a slight acceleration.

The real credits of private sector have kept the recovery on its growth path observed since April of the current year. During June, the credits were 19.0% greater than the same month of the previous year.

The active and passive interest rates, in real terms, have shown a slight contraction during the first months of 2016.

It is observed a recovery in the growth rate of real credit in almost all sectors, excluding livestock.

Domestic economic context Credit policy and international reserves

Net international reserves adjusted have a coverage of 167 Net international reserves adjusted have a coverage of 167.8% of monetary base, showing a slight reduction over the same period of previous year. Moreover, the coverage of gross international reserves on private deposits remained constant.

In June 2016, net international reserves adjusted has decreased on US$29.1 million in comparison with December 2015.

The reduction of international reserves is explained by the increase of transactions on the exchange market , which were compensated by the increase into the net incomes of non-financial public sector.

Forecast 2016-2017

Forecast of the main components of the aggregate demand

Forecast of the main components of the aggregate demand

Forecast of the main components of the aggregate demand preferential tariff treatment 

Forecast of the main components of the aggregate demand

Forecast of main sectors

Forecast of main sectors

Forecast of main sectors

Forecast of main sectors

FUNIDES estimates a real growth of 4.6% for 2016 and 4.5% for 2017.

FUNIDES surveys

The purchasing power of consumers has shown the first positive balance since December 2012, which is explained by the reduction of prices and increasing in financial sources.

The perception of the economic situation of the country by the entrepreneurs has fallen over the last two surveys of 2016.

The net balance on investment climate perception remained positive on 48% at July 2016.

¡Thank you!