Nicaragua - Current economic position and prospects (Vol. 2) : Memorandum on recent development and prospects in Nicaragua

IL AM mu * A ma. - rux Lur i ~~~~Vol. 2 ARNEX I NEMORANDUM ON J3LIECENT ECOtiOI'lC DE-VELOPiNTh AI.ND PROSPECTS IN NICARAGUA Introduction 1. The most recent economic report on Nicaragua (WH-135a, dated April 24, 1964) concLuded that Nicaragua's favorable growth prospects, its sound. management of development financing and low external debt service ratio made it creditworthy for additional external loans on con- ventional terms to finance its external capital requirements for some years to come. The improvement since 1961 in the economic position of Nicaragua, noted in the last report, has continued through 1965. 2. GDP rose by about 10 percent in current prices in 1965 as it did in 1962, and by 7 percent in each of the intervening two years. Though the cost of living a:Lso rose by four and three percent in 196L and 1965 respectively, the indiex stood no higher at the end of 1965 than it did 10 years before. Most of the increase in output in recent years has, there- fore, been in real terms. Income per head in 1965 reached a level of US$325, after increases of between four and seven percent per year in each of thp last foulr vyars Thp nroqnPntq for the next few vears. however. appear somewhat less bright. Agriculture and Exports 3 The m.ain stimulus to grnwth has n-mp from a r.aniri Pynqn.on in agricultural production for exports, particularly of cotton and coffee. Cotton eports rose Erom $1R m-il-lin in 196Q1 t.n $ millinn in 1965 a11 due to an expansion of the volume produced, since prices in fact showed some tendency to decLine. Coffee exports rose by20 percent in 1963i and again in 1965, due to a combination of price rises in the earlier, and an ex pansion of vo :U. n t. h l year. . e UJ.' i 1 ac- counted for 56 and l13 percent of total exports respectively. 4. The increase in exports has already begun to slow down, however, dropping fior, ar. ave:rage anunual rateU Vof 18 perce -n1jO1 o14 percen in 1965, and may decline to as low as 6 percent per year over the next five years. 'rIou1ghts iLn