Nicaragua's economy ranks as 61st freest economy, although it is 1.7% lower than in 2006, it ranks 14 (out of 29) in the Americas. Nicaragua's economy is 62.7% free with high levels of fiscal, government, labor, investment, financial, and trade freedom.[64] Nicaragua is primarily an agricultural country, but light industry, tourism, banking, mining, fisheries, and general commerce are expanding. Nicaragua's agrarian economy has historically been based on the export of cash crops such as bananas, coffee, sugar, beef and tobacco. At present agriculture constitutes 60% of its total exports which annually yield approximately US $300 million. In addition, Nicaragua's Flor de Caña rum is renowned as among the best in Latin America, and its tobacco and beef are also well regarded. Nicaragua also depends heavily on remittances from Nicaraguans living abroad, which totaled $655.5 million in 2006. During the war between the Contras and the Sandinistas in the 1980s, much of the country's infrastructure was damaged or destroyed. Inflation averaged 30% throughout the 1980s. After the United States imposed a trade embargo in 1985, which lasted 5 years, Nicaragua's inflation rate rose dramatically. The 1985 annual rate of 220% tripled the following year and skyrocketed to more than 13,000% in 1988, the highest rate for any country in the Western Hemisphere in that year. Since the end of the war almost two decades ago, more than 350 state enterprises were privatized, reducing inflation from 33,500% in 1988 to 9.45% in 2006, and cutting the foreign debt in half.

Though sources give slightly differing data on the country's gross domestic product (GDP), Nicaragua is the second poorest country in the Western Hemisphere. According to the CIA Fact Book, inflation averaged 8.1% from 2000 through 2006. As of 2007, Nicaragua's inflation stands at 9.8%. The World Bank also indicates moderate economic growth at an average of 5% from 1995 through 2004. In 2005 the economy grew 4%, with overall GDP reaching $4.91 billion. In 2006, the economy expanded by 3.7% as GDP reached $5.3 billion. According to the United Nations, 28% of the population in Nicaragua live in poverty (2006 est), unemployment is 3.1%, and another 46.5% are underemployed (2007 est.).

As in many other developing countries, a large segment of the economically poor in Nicaragua are women. In addition, a relatively high proportion of Nicaragua's average homes have a woman as head of household: 39% of urban homes and 28% of rural homes. According to UN figures, 80% of the indigenous people (who make up 8.6% of the population) live on less than $1 per day.

Gross Domestic Product (GDP) in purchasing power parity (PPP) in 2007 was estimated at $18.17 billion USD.[73] The service sector is the largest component of GDP at 56.9%, followed by the industrial sector at 25.9% (2006 est.). Agriculture represents only 17.1% of GDP (2007 est.). Nicaraguan labor force is estimated at 2.262 million of which 29% is occupied in agriculture, 19% in the industry sector and 52% in the service sector (est. 2007).

(Source: Wikipedia - the free encyclopedia)