Paraguay Economic Forecast

Last year, GDP stagnated, making the country Latin America’s worst-performing economy. In Q1 of this year, year-on-year GDP growth sped up sharply to 5.2% thanks to stronger exports plus private and government spending and a softer decline in fixed investment. In Q2, GDP growth likely remained robust, with economic activity expanding at a faster year-on-year pace than in the prior quarter. Output in agriculture, electricity, manufacturing and services supported activity in the quarter, according to the statistics office. In other news, Santiago Peña took office as prime minister on 15 August. He will face a host of challenges ahead: Rising crime, juggling ties with both China and Taiwan, a U.S. probe into his political mentor and the risk to agricultural output posed by the El Niño weather pattern.

Inflation slowed for the seventh consecutive month to 2.9% in August (July: 3.5%), below the Central Bank’s 4.0% target. Average inflation should remain roughly stable for the rest of the year before rising in 2024. Declining inflation led the Central Bank to cut its policy rate for the first time in more than three years on 23 August—by 25 basis points to 8.25%.