The Central Bank of Paraguay reported a 5.4% GDP growth in the first half of 2023 on Tuesday. Agriculture, services, electricity, and manufacturing led this increase.
On the demand side, net exports and both private and government consumption fueled growth. However, construction and livestock sectors performed poorly.
Moreover, gross capital formation also declined.
Miguel Mora, the Bank’s chief economist, said this growth aligns with earlier projections. He expects an upwardly revised 4.5% GDP growth by year’s end.
According to official data, agriculture alone grew by a staggering 50.1% in the first half.
Meanwhile, the electricity and water sector saw a 19.5% year-on-year growth in Q2, accumulating a 21.2% growth in the first half.
Additionally, the service sector registered a 2.6% growth by mid-2023. Manufacturing experienced a slight 0.2% rise during the same period.
On the flip side, sectors like livestock and mining declined 1.4% compared to Q2 of 2022, but recorded a 1.2% growth overall for the first half.
Background
To provide context, Paraguay’s economy struggled with stagnation in previous years. This year’s uptick is seen as a significant turnaround.
The agriculture sector’s remarkable growth can be linked to favorable weather conditions and high global demand for food.
Additionally, electricity growth may be attributed to increased domestic and foreign industrial activity.
In terms of future prospects, a focus on diversifying the economy could sustain this growth.
The Central Bank seems optimistic, especially with expected further increases in exports and consumer spending.
While the GDP growth is encouraging, mitigating the poorly performing sectors like construction and livestock remains crucial.
Lastly, the ongoing global economic conditions also pose potential risks and opportunities for Paraguay’s economy.