
Economic Overview
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Even though Paraguay is among the poorest countries in South America, the country has experienced high and steady growth in the past decade. According to the IMF, GDP grew by 0.2% in 2022, driven mainly by improved weather conditions that benefited agricultural activity and generation and exports of electricity. The improvement of the weather conditions should continue effecting the economy in 2023, as the resumption of activity should be mainly led by agriculture, reflecting in a GDP growth of 4.5% that same year and 3.5% in 2024.
Since 2013, Paraguay has adopted a Tax Responsibility Law, which sets the limit of the authorised fiscal deficit at 1.5% of GDP. In 2022, public deficit decreased to 4.1%. As such, the Fiscal Responsibility Law remained suspended, with deficit only likely to return below the ceiling by 2024, when the government should continue its prudent fiscal policy, keeping to the deficit limit of 1.5% of GDP. Paraguay has invested in many public development policies and has seen its foreign debt double over the last five years. Still, Paraguay's public debt is among the lowest in Latin America, at 40.9%, and should remain stable in the next couple of years (40.4% in 2023 and 40.3% in 2024). Inflation increased to 9.8% in 2022, and it is expected to decrease in the next two years, to 5.2% in 2023 and 4.1% in 2024. Those rates, however, are within the target range set by the central bank - between 2% and 6%. The agriculture, sales, and construction sectors continue to be the driving forces behind Paraguay's economic growth. The production of the Itaipu and Yacireta hydro-power plants, as well as highly productive farms and livestock, are economic drivers and account for more than 60% of Paraguay's total exports.
Paraguay has the lowest unemployment rate in the Mercosur area, which was an estimated 6.8% in 2022. However, poverty and income inequality remain major challenges. Still, the total poverty rate – which the World Bank defines as less than USD 3.10 a day – has been falling, and is currently 26.1%. Nevertheless, the extreme poverty rate (which concerns individuals living on less than USD 1.90 a day) has risen, going from 5.4% to 5.7%. In rural areas, 41.2% of the population lack a monthly income to cover basic necessities, whereas in urban centres this figure is 27.6%. Moreover, land concentration in the Paraguayan countryside is one of the highest in the globe, with 10% of the population controlling 66% of the land, while 30% of the rural people are landless, causing ongoing tension between the landless and elites.
Main Indicators | 2020 | 2021 | 2022 (E) | 2023 (E) | 2024 (E) |
GDP (billions USD) | 35.43 | 39.95 | 41.28 | 42.82 | 45.28 |
GDP (Constant Prices, Annual % Change) | -0.8 | 4.0 | 0.2 | 4.5 | 3.5 |
GDP per Capita (USD) | 4,885 | 5,433 | 5,539 | 5,668 | 5,914 |
General Government Balance (in % of GDP) | -6.5 | -6.5 | -4.1 | -3.3 | -2.3 |
General Government Gross Debt (in % of GDP) | 36.9 | 37.5 | 40.9 | 40.4 | 40.3 |
Inflation Rate (%) | 1.8 | 4.8 | 9.8 | 5.2 | 4.1 |
Unemployment Rate (% of the Labour Force) | 7.7 | 7.5 | 7.2 | 6.4 | 6.1 |
Current Account (billions USD) | 0.96 | 0.37 | -2.14 | -1.08 | -1.41 |
Current Account (in % of GDP) | 2.7 | 0.9 | -5.2 | -2.5 | -3.1 |
Source: IMF – World Economic Outlook Database , October 2021
Country Risk
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