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Central Bank Calculates Inflation Could Reach 16%

December 14, 2007

MANAGUA – The soaring prices of food staples and petroleum could push Nicaragua’s accumulated year-end inflation rate up to 16.5% or higher, according to the new projections released last week by the Central Bank.

Central Bank president Antenor Rosales said that new calculations by government economists show that there is a 70% probability that inflation will be between 14.5-15.5%, and a 10% chance that it will be even higher.

Regardless of how the numbers are cooked, inflation appears to be on track to finish at its highest since 1998, when inflation finished at

18.4% following Hurricane Mitch.

Although Nicaragua was again pounded by storms and hurricanes this year, the difference between 2007 and 1998 is that “the price of oil is 500 times higher now,”Rosales said.

“If the price of oil drops to $91 a barrel and the last crop cycle here is consumed domestically and not exported, then inflation could be around 13.5%,” Rosales told a group of business leaders at a Dec. 4 luncheon in Managua. “But if petroleum goes to $97 or higher, and the final crop harvest is exported, then inflation is going to be high, around 16.5%.”

Food prices on basic staple items in Nicaragua have climbed an average of 17%, the biggest increase of any country in the region, according to comparative data complied by the Mexican Central Bank. Fuel prices, meanwhile, have climbed anywhere from 60 -100%, depending on the type of oil.

The Central Bank originally calculated inflation to be in the single digits this year.

 

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