Paraguay GDP Hits 6.6% as South America’s Fastest Grower

Paraguay GDP grew 6.6 percent in 2025, according to data published by the Central Bank, making the landlocked nation South America’s fastest-growing economy for the second consecutive year. The Rio Times, the Latin American financial news outlet, reports that every productive sector expanded, with agriculture and hydroelectric energy leading the way and private consumption driving demand — a performance that reinforces Paraguay’s emergence as one of Latin America’s most overlooked economic success stories.

The fourth quarter alone grew 6.2 percent year-on-year, powered by a 20.8 percent surge in agriculture as soybean and grain harvests recovered from prior drought years. The strong close brought the full-year figure comfortably above the 4.2 percent that economists had projected at the start of the year.

What Drove the Paraguay GDP Performance

Agriculture grew 10.5 percent for the full year, contributing the largest share of the expansion. Electricity and water — dominated by the binational Itaipu and Yacyreta hydroelectric dams that Paraguay shares with Brazil and Argentina — expanded 10.9 percent as improved rainfall restored generating capacity. Together, these two sectors reflect Paraguay’s core structural advantage: it is simultaneously a major agricultural exporter and one of the world’s largest producers of clean hydroelectric energy.

Manufacturing grew 5.6 percent, construction expanded 6.2 percent, services rose 6.3 percent, and livestock, forestry, fishing, and mining added 6 percent — making this the rare Latin American expansion where every sector contributed. From the demand side, private consumption and fixed capital investment drove growth, while government consumption and net exports made negative contributions.

Paraguay in Regional Context

The 6.6 percent result puts Paraguay ahead of every major economy in the region. Argentina grew 4.4 percent but from a deep contraction base. Peru posted 3.4 percent. Brazil and Colombia came in below 3 percent. Paraguay achieved its growth with inflation at just 2.3 percent — a five-year low — and a central bank rate held steady at 5.5 percent after two cuts earlier in the year.

Moody’s awarded Paraguay its first investment-grade credit rating in 2024, and the Heritage Foundation ranked it among the freest economies in South America. The combination of fiscal discipline, low inflation, competitive labor costs, and abundant energy has attracted growing attention from investors looking for alternatives to Brazil and Argentina’s political volatility.

The challenge ahead is sustaining the pace. The central bank projects 4.2 percent growth for 2026 as the agricultural base effect normalizes and global trade uncertainty weighs on commodity prices. But for a country of 7 million people that produces more clean energy per capita than almost anywhere on earth, the structural foundations for continued outperformance are firmly in place.