MercoPress. South Atlantic News Agency

IMF foresees prosperous 2024 for Paraguay

Argentina is at the bottom of the IMF's list, with GDP expected to contract by 3.5%

According to the International Monetary Fund's (IMF) “World Economic Outlook” report released Tuesday in Washington DC, Paraguay is the country in the region that will grow the most this year with a projected Gross Domestic Product (GDP) of 3.8%, way above South America's 1.8% average. Following Paraguay is Uruguay's 3.2% GDP, with Brazil, Peru, and Venezuela tied at 3%. Argentina ranks at the bottom of the list (-3.5%).

In this scenario, Paraguay's Central Bank (BCP), which earlier this month said the country's GDP would grow 4% this year in a calculation consistent with that of the IMF, Tuesday kept its monetary policy rate at 6% for the eighth consecutive month. For 2025, the IMF foresees Paraguay to keep this year's pace while Argentina is expected to bounce back to +5%.

The BCP said its decision was based on lower international risks and a more gradual rate cut by the US Federal Reserve, as job creation exceeded expectations and unemployment fell to 4.1% in September from 4.2% in August.

In addition, inflation has slowed more than expected. In this context, the market expects that the central bank may adopt a more gradual pace in future interest rate adjustments.

On the domestic front, Paraguay's Monthly Indicator of Economic Activity (IMAEP) showed a variation of 1.6% yoy in August, driven mainly by services and manufacturing, while electricity, water, construction, and livestock all contracted. In the same month, the Estimator of Business Figures (ECN) grew by 2.4% year-on-year, driven by higher sales of chemical and pharmaceutical products, clothing, household equipment, and fuels. Year-on-year, the IMAEP and ECN cumulatively grew by 4.2% and 7.1% respectively, while the Consumer Confidence Index (CCI) remained at 54.1 in September.

Paraguay's consumer price index (CPI) rose 0.2% in September, driven by some durable goods and services, although this was partly offset by a fall in the prices of volatile components. Year-on-year inflation fell from 4.3% in August to 4.1% in September. Core inflation (IPCSAE), which excludes food and energy, was 0.4% mom and 3.6% yoy. Overall, measures of inflation trends and expectations remain around 4.0%.

It was also noted that short-term indicators continued to develop favorably. Hence the upward revision from 3.8% to 4.0%. The BCP's Monetary Policy Committee (MPC) stressed that it would closely monitor international and local developments to keep inflation on a tight leash. The next MPC meeting is scheduled for Nov. 19.