MercoPress. South Atlantic News Agency

Paraguay's GDP poised to be better than planned, central Bank says

The market still has a lot of credibility in Paraguay's monetary management, Cantero explained.

Paraguay's Central Bank (BCP) Thursday hinted the country's GDP might grow above expectations by the end of 2021.

BCP CEO José Cantero Thursday announced that judging by the way production and sales were behaving (above pre-pandemic levels) the GDP could be of 4.5% or higher.

The official made those announcements at a meeting organized by the Paraguay-Brazil Chamber of Commerce, where together with Óscar Llamosas, Minister of Finance, and João Pedro Bumachar Resende, economist at Itaú Bank, they spoke about the economic and fiscal scenarios in both countries.

Cantero highlighted Paraguay's good macroeconomic health of Paraguay and how that condition allowed the country to better cope with the shock of the COVID-19 pandemic last year, compared to other nations. He also highlighted the effectiveness of the various measures adopted by the economic authorities, which allowed the economic decline in 2020 not to be as deep as it initially was feared to become, staying only between -4% and -5%.

Regarding the 2021 dynamics, Cantero stressed that according to preliminary reports of the Monthly Indicator of Economic Activity (Imaep), the local economy accumulated an increase of 5.7% so far this year, ”which allows us to infer that the gross domestic product (GDP) can grow above 4.5%, which is the estimate currently maintained by the Central Bank of Paraguay.“ However, ”this figure will be revised in the coming days,” he said.

Cantero also pointed out that overall both production and sales remained above pre-pandemic levels, despite the fact that there were still some laggards in their recovery.

Regarding inflation, Cantero admitted the results of the Consumer Price Index (CPI) were above the BCP's goals, but medium term expectations remained around 4% with a plus/minus 2% margin of error. The market still has a lot of credibility in Paraguay's monetary management, he explained.

The official also expressed the need to move towards a greater and more accelerated diversification of the national economy and achieve institutional improvements that strengthen Paraguay's position.

Bumachar Resende explained Brazil's economy would be growing around 5% by the end of this year, but could experience a contraction of around 0.5% for the year 2022. He also explained the sanitary situation was improving, but other external and internal factors could affect the economic scenario.

First, he listed a high inflation in the United States and the possibility that Federal Reserve interest rates will rise at a faster pace than currently expected - which is negative for all emerging markets. Then he also mentioned ongoing problems with China.

The banking executive also highlighted Brazil's high public debt, fueled by an increase in federal public spending, which boosts inflation, in addition to higher prices keeping up local interest rates on the rise, which in turn, had an impact on domestic access to credit.

(Source: Ultima Hora)