GROWTH DIAGNOSTIC FRAMEWORK: CASE STUDY OF NICARAGUA

Abstract

Nicaragua has one of the lowest growth domestic products (GDP) growth rates in the Americas, since
its economic crisis, which lasted from 1978 to 1994. This investigation conducts a growth diagnostics of
the Nicaraguan economy in order to identify the causes to its low growth rates compared to other
countries in the region, focusing on Central American countries. This tool explains and exposes the
main economic, social and political factors that impede the economic growth of a particular country in a
specific context in time; also, it lists elements that generate low income in economic activities, and high
finance costs, which negatively affect private investment and entrepreneurship.
Our findings permit the development of a more successful growth strategy by designing specific policies
in order to tackle the existing problems and obtain productive investment, productivity and a higher
growth rate. We propose some policy reforms to eliminate the binding constraints identified in
Nicaragua, and to increase growth and development outcomes.