RIO DE JANEIRO, BRAZIL – Paraguay’s economic growth is expected to slow this year after a strong recovery forecast for 2021. The slowdown will be partly due to a statistical effect, as solid public and private spending will support economic activity, international consultancy FocusEconomics said in its Latin Focus report.
Relatively high government debt and extreme weather events such as severe droughts are the biggest downside risks to the outlook. “FocusEconomics panelists forecast economic growth of 3.5% in 2022, down 0.1 percentage point from last month’s estimate, and 3.9% in 2023″, the report says.
In doing so, the consultancy joins a number of local institutions that have already lowered their economic forecasts for Paraguay in light of the unexpected weather situation.
It is therefore to be expected that further private and multilateral institutions will join in the reduction of expectations for Paraguay this year.
SLOWER PACE
The economy continued to grow in the third quarter, albeit at a slower pace of 3.8% year-on-year, after expanding by 13.9% in the previous quarter. The slowdown was due to moderate domestic demand, with private, public and investment spending growing at weaker rates, Latin Focus reported.
Nevertheless, a tight labor market and higher household credit growth should help support consumption, despite rising price pressures during the period.
For its part, the foreign sector has weighed on overall growth. The recovery is likely to have slowed further in the fourth quarter, as economic activity grew at its slowest pace in eight months in October.
On a positive note, household credit rebounded to a five-month high in the same month, which should support spending. In early January, authorities announced debt refinancing credit lines and tax cuts for agricultural and livestock enterprises through the end of September to help them cope with a severe drought, international analysts said.