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 | 2022 | 2023 (E) | 2024 (E) | 2025 (E) | 2026 (E) |
| GDP (billions USD) | 41.95 | 43.87 | 45.82 | 48.03 | 51.40 |
| GDP (Constant Prices, Annual % Change) | 0.2 | 4.5 | 3.8 | 3.8 | 3.5 |
| GDP per Capita (USD) | 5,628 | 5,807 | 5,984 | 6,191 | 6,537 |
| General Government Balance (in % of GDP) | -3.1 | -4.5 | -2.9 | -2.3 | -1.9 |
| General Government Gross Debt (in % of GDP) | 40.5 | 40.3 | 43.1 | 41.7 | 41.1 |
| Inflation Rate (%) | 9.8 | 4.6 | 3.8 | 4.0 | 4.0 |
| Unemployment Rate (% of the Labour Force) | 6.8 | 6.2 | 6.0 | 6.0 | 6.0 |
| Current Account (billions USD) | -2.99 | 0.10 | 0.26 | 0.72 | 0.73 |
| Current Account (in % of GDP) | -7.1 | 0.2 | 0.6 | 1.5 | 1.4 |
Source: IMF – World Economic Outlook Database , October 2021
Country Risk
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