MercoPress. South Atlantic News Agency

Paraguayan economy forecasted to suffer a strong contraction this year

Drought and FMD, two unexpected blows for the economy

The economy of Mercosur junior member Paraguay, is set to remain flat or even suffer a slight contraction in 2012 after several years of sustained growth announced on Tuesday the country’s central bank.

According to the latest report Paraguay’s GDP expansion range is between 0% and minus 2.5%, but most probably will settle at minus 1.5%. The bank argues that slower expansion from the agriculture sector, with agriculture struck by drought and livestock by an outbreak of foot and mouth disease means the sector will only expand 3.7%, when for several years it grew at more than double that digit.

However on the upside the bank also underlines that construction is undergoing a strong recovery and at world level the emerging economies are expected to expand 5.4% on average, and more specifically Latin America and the Caribbean 3.6%.

Paraguay expanded a record breaking 15% in 2010 but then was down to 7% last year with agriculture representing almost 50% of GDP.

Regarding livestock and meat exports, (Paraguay’s second item behind soybeans) during the first quarter of this year they dropped 33.4% reported the country Food Quality and Animal Health Service, Senacsa.

While in the first quarter of 2011, beef, chicken and by-product exports totalled 71.721 tons, this year the volume dropped to 47.770 tons. Chicken meat exports virtually came to a stand still in the first quarter, cattle offal was down 45% and beef 42%.