MANAGUA, Aug 11 (Reuters) - Nicaragua's central bank cut its economic growth outlook on Monday and raised its inflation forecast due to a drought that has hurt crops and pushed up food costs, and that also spurred the government to propose spending cuts.
The central bank now expects growth in gross domestic product (GDP) to be between 4 and 4.5 percent in 2014, central bank Governor Ovidio Reyes said, down from the 4.5 to 5 percent the bank forecast in April.
The economy of Nicaragua, Central America's most impoverished nation, grew 4.6 percent last year.
Reyes said inflation was expected to be in the range of 6.5 to 7.5 percent at the end of the year, half a percentage point above the bank's April forecast. In 2013, the annual inflation rate was 5.67 percent.
Just after Reyes spoke, Finance Minister Ivan Acosta presented lawmakers with a plan to slash public investment by $118 million to make up for an expected shortfall in revenue.
Nicaragua is preparing a "plan B" in case the lack of rain continues, Reyes said, which could involve asking for financial assistance from the World Bank, the Interamerican Development Bank and the International Monetary Fund (IMF). (Reporting by Ivan Castro; Editing by Peter Galloway)