MercoPress. South Atlantic News Agency

Paraguay's BCP announces overoptimistic GDP projection

The impact of global tariffs “will probably be more indirect,” Carvallo argued

Despite many experts believing otherwise, Paraguay's Central Bank (BCP) has raised its GDP growth projection for 2025 from 3.8% to 4% amid geopolitical tensions and potential trade wars. BCP President Carlos Carvallo defended the adjustment, citing strong economic performance and advanced data showing better-than-expected dynamics in several sectors, except agriculture, which was impacted by drought-affected soybean production.

Carvallo noted that Paraguay’s macroeconomic stability and neutral monetary and fiscal policies, aligned with the 1.5% GDP deficit limit, should mitigate indirect effects from global trade disruptions. However, economic agents surveyed by the BCP are less optimistic.

Whereas most international organizations have maintained a more cautious approach, the BCP came up with a surprising move by upping its projections. Carvallo defended this adjustment, saying they were based on advanced data that show a much better than expected favorable dynamics.

“The information we have is that from some leading indicators of economic dynamics, among other factors that are taken into account to project the economy, are well above what we had predicted last December. So that was the reason why, despite the international situation, all the evidence shows that even being conservative, 4% is reasonable for this year,” he said.

As for the blows we may receive from the trade war or tariffs, he estimates that the impact we are going to have directly from the measures is going to be very low. “The impacts will probably be more indirect,” he added.

At the International Monetary Fund (IMF) and World Bank (WB) annual meetings last month, tariffs were a main concern, he also explained. In any case, countries were advised to prioritize macroeconomic matters, and, in this regard, Paraguay is on track with its neutral monetary policy and its fiscal policy, which would again reach the deficit limit established in the Fiscal Responsibility Law, at 1.5% of GDP, the BCP head also pointed out.

However, the BCP's Survey of Expectations of Economic Variables (EVE) forecast a less optimistic scenario, with higher inflation and lower economic growth this year in a still volatile global context. These experts foresaw a GDP growth of 3.8% for both 2025 and 2026, well below last year's 4.2%, with inflation projected to stand at 4.0%, above the BCP's 3.8% calculation and also above the 3.5% target for this year.