CenAm Watch: Nicaragua takes economic hit, CR posts higher deficit

Nicaragua faces economic repercussions

Nicaraguan central bank president Ovidio Reyes said ongoing unrest in the nation has motivated the bank to cut its GDP growth outlook for 2018 to between 3.0% and 3.5% from 4.5% and 5.0% before protests started last month.

Reyes, in statement given Monday for the church-organized national dialogue for stability, added that the central bank believes the continued actions and conflicts between pro and anti-government groups looks to cost the nation 58,300 new jobs because of slower economic growth.

"The loss to date is US$258.9mn, much more than the economic measures that were proposed," said Reyes, referring to the pension reforms ordered April 16, which sparked the initial wave of protests and violence. President Daniel Ortega, who ordered the reforms, rescinded the proclamation days later in response.

Reyes noted the sectors most affected have been hotels, restaurants, trade and services, adding that the agriculture and livestock sector was on the verge of beginning its key production cycle and would likely face considerable losses with the limited commercial activity associated with the current situation.

The central banker said the tourism industry was set to face the highest losses, estimated at US$185mn.

"The big problem is that tourism takes time to build, and that the tourist who is no longer coming is going take a lot to get back," said Reyes. "These US$185mn of tourism losses will continue to grow."

The central bank also expects a drop of US$157mn in foreign direct investment, as well, and that exports should take a US$270mn hit this year.

"As I just mentioned, these are all big numbers ... These are numbers that are going to have an impact on sales, on business, on job losses," said Reyes. "We believe that one of the first actions, or the first action, that should prevail in this dialogue is to recover the stability so that the economy returns to flow."

Pictured: Unions and civil society representatives take part in the church-mediated "national dialogue" talks between the government and the opposition in a bid to quell a month of anti-government unrest that has seen more than 50 people killed, at the National Seminary of Our Lady of Fatima, in Managua on May 21.

Costa Rica sees 1.9% deficit

The Costa Rican finance ministry reported that the government's fiscal deficit grew to 671bn colones (US$1.2bn) in 1Q18, or 1.9% of GDP - up from 1.8% of GDP in the same period a year before.

The report comes as newly inaugurated President Carlos Álvarado is working with legislators to hammer out a final deal to address the nation's looming fiscal crisis - primarily through the introduction of a sweeping VAT on most purchases.

In the announcement, finance minister Rocio Aguilar said the "unfavorable results" for the first quarter reflected the difficult economic and fiscal situation the country faces.

"National and international analysts agree with the government in the urgency of making effective decisions that allow progress in the solutions that the country needs to balance public finances," said Aguilar. "We must improve revenues and reduce expenses through all possible means."

"We [in the executive branch] have begun to do our task to work on both tracks with the tools we have, but the urgency to move forward with the legal reforms that are in the legislative assembly is indisputable," said Aguilar.

The ministry also reported that total accumulated revenues were up 3.8% year-on-year in the first quarter, while accumulated expenses increased by 7.6%. The ministry added that tax collection was up by 3.2% in the first quarter; however, this growth is far weaker than the 17.7% seen in 1Q17.