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Economic Overview

Even though Paraguay is among the poorest countries in South America, it has experienced steady growth in the past decade, with an average annual GDP growth rate of 3.2%. As 80% of direct exports and at least 17% of output rely on agriculture, livestock, and hydropower, the country is vulnerable to fluctuations in commodity prices and weather conditions. The World Bank estimated growth at 4.7% in 2023, thanks to favorable weather conditions. In 2024, the economy is expected to grow by 3.8%, assuming no major weather disruptions. Fixed investment growth is anticipated to accelerate, driven by around 10% of GDP investments in sectors like pulp, biofuels, and green hydrogen. Private consumption growth is likely to speed up as average inflation remains within target. Growth is forecasted to slightly ease to 3.6% in 2025-2026, driven by intensified fiscal consolidation efforts (World Bank).

Concerning public finances, in 2023, the fiscal deficit reached 4.1% of GDP, surpassing the original target by 1.8 percentage points. This increase was mainly attributed to the settlement of government arrears totaling around US$600 million (approximately 1.1% of GDP), elevated interest payments and social transfers, and decreased corporate income tax receipts resulting from the 2022 drought. Consequently, public debt rose to an estimated 38.2% of GDP, predominantly denominated in foreign currency (data from the World Bank). Since 2013, Paraguay has adopted a Tax Responsibility Law, which sets the limit of the authorized fiscal deficit at 1.5% of GDP; although the limit has not been respected, the authorities are committed to achieving the target by 2026, implying substantial cuts in personnel and capital spending and therefore slower government consumption and investment growth in the upcoming future. To mitigate its foreign exchange exposure, Paraguay effectively issued USD 500 million in Guaraní-indexed sovereign bonds for the first time in February 2024, in addition to USD 500 million in USD-denominated bonds. In February 2024, year-on-year headline inflation decreased to 2.9% from 3.4% in January and 3.7% in December 2023, comfortably within the target range of 2-6%. Core inflation also dropped slightly from 4.7% to 4.6%, although it remained above the midpoint. The Central Bank proceeded to reduce rates in January and February 2024, with a total cut of 50 basis points, resulting in the policy rate reaching 6%.

Paraguay has the lowest unemployment rate in the Mercosur area, which was an estimated 5.6% in 2023. However, approximately 19% of Paraguayans lived below the international poverty line for upper-middle-income countries, which was set at USD 6.85 per person per day in 2017 PPP. This figure is only 5 percentage points lower than that recorded in 2013, and 35 percent of the population remains vulnerable to poverty. Paraguay’s GDP per capita (PPP) was estimated at USD 15,982 in 2022, but high inequality persists, indicated by a Gini coefficient of 45 points, highlighting disparities in human capital across the population.

 
Main Indicators 20222023 (E)2024 (E)2025 (E)2026 (E)
GDP (billions USD) 41.9543.8745.8248.0351.40
GDP (Constant Prices, Annual % Change) 0.24.53.83.83.5
GDP per Capita (USD) 5,6285,8075,9846,1916,537
General Government Balance (in % of GDP) -3.1-4.5-2.9-2.3-1.9
General Government Gross Debt (in % of GDP) 40.540.343.141.741.1
Inflation Rate (%) 9.84.63.84.04.0
Unemployment Rate (% of the Labour Force) 6.86.26.06.06.0
Current Account (billions USD) -2.990.100.260.720.73
Current Account (in % of GDP) -7.10.20.61.51.4

Source: IMF – World Economic Outlook Database , October 2021

Country Risk

See the country risk analysis provided by La Coface.

 

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Main Sectors of Industry

Breakdown of Economic Activity By Sector Agriculture Industry Services
Employment By Sector (in % of Total Employment) 19.7 19.5 60.8
Value Added (in % of GDP) 11.3 33.2 48.3
Value Added (Annual % Change) -8.7 0.4 1.6

Source: World Bank - Latest available data.

 
Monetary Indicators 20162017201820192020
Paraguayan Guarani (PYG) - Average Annual Exchange Rate For 1 USD 5,670.525,618.935,732.106,240.706,771.10

Source: World Bank - Latest available data.

 

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Foreign Trade

Although it is a landlocked country, Paraguay is open to international trade, which represents 71% of the country’s GDP (World Bank, latest data available). Even though Paraguay is a founding member of Mercosur, the country was excluded from the bloc in 2012 due to President Fernando Lugo’s impeachment, but soon re-joined the group in 2013, after President Horacio Cartes was elected. The country mainly exports meat (18.4%), electrical energy (16.8%), cereals (15%), and oilseeds and oleaginous fruits (14%); while imports are led by fuels (16.5%), electrical machinery and equipment (15.6%), boilers, machinery, and other (11.6%), motor vehicles, tractors (8.0%), fertilizers (4.9% - data Directorate for Foreign Trade and Investment 2022).

According to official data, Paraguay’s main export partners in 2022 were Brazil (USD 3,663 million), Argentina (USD 1,943 million), Chile (USD 1,137 million), Russia (USD 356 million), and the U.S. (USD 255 million). Concerning imports, they came chiefly from China (USD 4,222 million), Brazil (USD 3,483 million), the U.S. (USD 1,348 million), Argentina (USD 1,241 million), and Singapore (USD 357 million). The Government’s economic policy aims to increase international trade to boost the economy and develop competitive sectors, through low and uniform tariff protections. In an attempt to diversify its economic partners, the country has sought permanent membership in the Pacific Alliance trade bloc, as it is currently only an observer. Paraguay is a member of the WTO and Mercosur, and has trade agreements with Colombia, Egypt, Israel, Peru, Bolivia, Chile, Morocco, Mexico, and India, among others.

According to the WTO, in 2022, imports of goods amounted to USD 15.8 billion, marking a 16.9% increase year-on-year, while exports decreased by 5.6%, to USD 9.9 billion. Concerning the trade of services, imports totaled USD 2.3 billion, while exports amounted to USD 2.1 billion. In the same year, the World Bank estimated the country’s trade deficit to account for around 4.9% of GDP. Figures from Banco de Paraguay show that, in 2023, exports surged 19.5% year-on-year to USD 11.9 billion, against USD 15.6 billion in imports.

 
Foreign Trade Values 20192020202120222023
Imports of Goods (million USD) 12,54410,21713,56015,85316,105
Exports of Goods (million USD) 7,9688,51810,5479,95711,891
Imports of Services (million USD) 2,0411,2521,7222,3982,444
Exports of Services (million USD) 2,2031,3841,5982,1552,544

Source: World Trade Organisation (WTO) ; Latest available data

Foreign Trade Indicators 20182019202020212022
Foreign Trade (in % of GDP) 72.171.262.869.773.9
Trade Balance (million USD) 5732031,226629-1,929
Trade Balance (Including Service) (million USD) 6663651,357505-2,169
Imports of Goods and Services (Annual % Change) 8.2-2.0-15.221.85.6
Exports of Goods and Services (Annual % Change) -0.4-3.4-9.02.1-1.6
Imports of Goods and Services (in % of GDP) 35.235.129.534.339.4
Exports of Goods and Services (in % of GDP) 36.936.133.335.534.5

Source: World Bank ; Latest available data

Foreign Trade Forecasts 20232024 (e)2025 (e)2026 (e)2027 (e)
Volume of exports of goods and services (Annual % change) 33.12.64.02.22.1
Volume of imports of goods and services (Annual % change) 9.72.52.02.42.3

Source: IMF, World Economic Outlook ; Latest available data

Note: (e) Estimated Data

 
International Economic Cooperation
Member of Mercado Comun del Sur (MERCOSUR)

 

Member of Latin American Integration Association

Member of Free Trade Area of the Americas (FTAA)

The country have signed a trade agreement with 21 other countries in the São Paulo Round of the Global System of Trade Preferences among Developing Countries (GSTP).

 

Main Partner Countries

Main Customers
(% of Exports)
2022
Brazil 36.9%
Argentina 19.2%
Chile 11.6%
United States 2.6%
Uruguay 2.0%
See More Countries 27.7%
Main Suppliers
(% of Imports)
2022
China 29.5%
Brazil 23.2%
United States 9.3%
Argentina 8.4%
Singapore 2.4%
See More Countries 27.3%

Source: Comtrade, Latest Available Data

 

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