MercoPress. South Atlantic News Agency

Paraguay's GDP projections revised upwards

The soybean complex is anticipated to underperform compared to broader economic growth due to adverse weather conditions, according to the BCP forecast

The Central Bank of Paraguay (BCP) has revised its 2025 GDP growth forecast upward from 3.8% to 4.0%, driven by stronger-than-expected economic activity in early 2025, BCP Chief Economist César Yunis explained. To reach these conclusions, the following issues were taken into consideration:

Services Sector: Growth forecast increased from 3.4% to 4.0%, fueled by commerce, financial intermediation, household services, and hospitality.

Secondary Sector: Construction growth revised up from 4.3% to 4.9% due to increased public and private works. Electricity, water, and manufacturing projections remain unchanged.

Primary Sector: Agriculture growth downgraded from 2.0% to 0.6% due to lower soybean production from adverse weather. But on a brighter note, livestock growth went up to 2.3% from 0.3%, supported by strong external demand.

Agriculture and Binational companies excluded, Paraguay's GDP is projected to reach 4.0%, up 0.4 points from the prior estimate, while inflation would rise to 3.8% from 3.7%, slightly above the 3.5% target, due to temporary increases in fruit, vegetable, and durable goods prices. Underlying inflation remains stable, with the monetary policy rate unchanged at 6%.

Paraguayan analysts also foresee that an improved outlook in Argentina -from 4.0% to 4.5%- could lead to increasing exports, somehow offsetting dwindling global growth projections from 3.1% to 2.9% amid trade tensions. However, the soybean complex is anticipated to underperform compared to broader economic growth due to adverse weather conditions, leading to a downward revision in agriculture growth from 2.0% to 0.6%. Export expansion is also expected to slow to 3.0%, reflecting a 5-point drop caused by reduced grain shipments. Despite a 4.3% year-on-year decline in the agricultural sector during Q4 2024, the year ended with a 2.8% overall growth, driven by increased production of soybeans, wheat, rice, cotton, and yerba mate, though corn production saw a decline.

Private consumption growth was revised to 4.3% from 3.6%, and gross fixed capital formation to 4.5% from 3.9%, reflecting stronger domestic demand.

Despite agricultural challenges, non-agricultural sectors and consumption drive the optimistic outlook, though inflation is slightly higher than targeted. Economy Minister Carlos Fernández Valdovinos had already projected a 4% expansion for 2025 in a recent interview.