Paraguay Economic Outlook

December 4, 2018

Incoming data suggests that the economy lost steam in Q3, after expanding at the fastest annual clip in over a year in Q2. Economic activity cooled significantly on average in Q3 from Q2, largely owing to a marked year-on-year contraction in September due to softer dynamics in the industrial and services sectors. Moreover, weaker demand from the EU and Asia led to lower merchandise exports in Q3 compared to last year, suggesting the external sector dragged on overall growth in the quarter. Meanwhile, at the conclusion of its yearly staff visit on 15 November, the IMF praised authorities’ macroeconomic management but also recommended addressing infrastructure needs and strengthening the financial system in view of improving the business environment.

Paraguay Economic Growth

Although the economy is expected to shift into a lower gear next year, growth should remain strong on the back of upbeat domestic demand. Subdued growth in Argentina or Brazil—Paraguay’s main trading partners—could dent export activity, posing a key risk to the outlook. FocusEconomics panelists expect growth of 4.1% in 2019, which is unchanged from last month’s estimate, and 3.9% in 2020.

Paraguay Economy Data

	2013	2014	2015	2016	2017
Population (million)	6.6	6.7	6.8	6.9	7.0
GDP per capita (USD)	4,422	4,636	4,034	3,992	4,233
GDP (USD bn)	29.0	30.9	27.3	27.4	29.4
Economic Growth (GDP, annual variation in %)	14.0	4.7	3.0	4.0	4.3
Domestic Demand (annual variation in %)	7.4	5.3	2.6	-	-
Consumption (annual variation in %)	4.5	3.8	1.9	0.9	-
Investment (annual variation in %)	11.9	8.8	2.0	7.9	11.5
Unemployment Rate	7.9	6.5	5.5	7.4	-
Fiscal Balance (% of GDP)	-1.7	-1.1	-1.7	-1.5	-1.5
Public Debt (% of GDP)	14.4	17.6	20.0	22.8	24.1
Money (annual variation in %)	17.5	7.8	5.8	8.1	16.4
Inflation Rate (CPI, annual variation in %, eop)	3.8	4.2	3.1	3.9	4.5
Inflation Rate (CPI, annual variation in %)	2.7	5.0	3.1	4.1	3.6
Inflation (PPI, annual variation in %)	2.9	0.1	5.0	4.2	-
Benchmark Interest Rate (%)	11.48	8.96	9.63	8.57	7.81
Exchange Rate (vs USD)	4,598	4,636	5,782	5,848	5,588
Exchange Rate (vs USD, aop)	4,315	4,465	5,210	5,683	5,632
Current Account (% of GDP)	2.1	-0.2	-1.1	1.5	-1.3
Current Account Balance (USD bn)	0.6	-0.1	-0.3	0.4	-0.4
Trade Balance (USD billion)	1.7	1.0	0.6	1.4	0.6
Exports (USD billion)	13.6	13.1	10.9	11.2	12.1
Imports (USD billion)	11.9	12.1	10.3	9.8	11.5
Exports (annual variation in %)	16.7	-3.7	-16.6	2.1	8.3
Imports (annual variation in %)	7.8	1.1	-14.6	-5.1	17.7
International Reserves (USD)	5.9	6.9	6.2	7.1	6.7
External Debt (% of GDP)	54.2	53.4	59.2	59.6	-

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Paraguay Facts

	Value	Change	Date
Exchange Rate	5,936	0.18 %	Dec 11

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