Macroeconomic Forecast Nicaragua

Headline consumer price inflation (CPI) rose 0.24% month-on-month in December, taking the year-on-year (y-o-y) rate up to 0.9% by the end of the year, up from 0.5% in the preceding month. Although Nicaragua has mostly remained in moderate inflationary territory during 2009, we attribute the spike in the y-o-y rate in large part to base effects set in late 2008, as stalling economic activity and falling global commodity prices saw CPI moderate. Nevertheless, we caution that the rate of inflation in Nicaragua could be on the rise as commodity prices continue to rally. We currently project an average headline inflation rate of 3.9% y-o-y in 2010.

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