Nicaragua

This report does not constitute a rating action. Overview Institutional and economic profile Flexibility and performance profile Prudent macroeconomic policies and strong remittances underpin Nicaragua's economic performance. The country has macroeconomic stability, with positive fiscal balances and a favorable debt profile. --International trade tensions pose risks to Nicaragua's economic, external, fiscal, and monetary profiles. --Fiscal and current account surpluses will continue but narrow toward 2028. --We expect slower remittance growth and weaker external demand to moderate economic growth. --Positive fiscal and external results have led to reduced debt levels and an accumulation of buffers. --Centralization of power in the executive branch and weak checks and balances remain. --Monetary flexibility is limited, and the financial sector is highly dollarized. We assume

...Trade tensions with the U.S. have escalated recently, adding uncertainty to our base case. We assume that potential added sanctions from the U.S. will not worsen Nicaragua's creditworthiness due to its moderate external and fiscal buffers. The U.S. is Nicaragua's top export market, and a more severe deterioration than we expect of the bilateral relationship could hurt Nicaragua's credit profile. Prudent economic and fiscal policy have helped reduce the government debt burden, which we expect to continue decreasing. On the other hand, concentration of political power and decision-making reflects weak checks and balances....

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