Bolivia's economy to contract 3.6% this year on construction slump, El Niño fears: Central Bank

Bolivia's economy is expected to shrink by 3.6% this year, a significant downturn projected by the Central Bank of Bolivia (BCB). The BCB's "Inflation Report and Monetary Policy. Second Quarter 2026" attributes this contraction to several factors, including a slowdown in the construction sector, increased costs for imported materials, and the potential adverse effects of the El Niño phenomenon on agriculture.

The report highlights that the construction sector's performance, influenced by the execution of public and private projects, has had ripple effects on the demand for related inputs like cement. Furthermore, businesses reliant on imported inputs face mounting costs. The anticipated strong El Niño event is expected to primarily impact the agriculture and food industries, sectors that had shown relative resilience through June.

During the first half of 2026, Bolivia's economic activity experienced a marked deterioration, with the GDP accumulating a variation of -3.34% by June. This reverses a slight recovery of 0.06% estimated in the first quarter. The BCB identified the intensification of social conflicts between May and June as a major contributor to this decline. These conflicts, which included road blockades and transport strikes, paralyzed the country's main transport routes for over fifty days, disrupting logistics and supply chains.

Compounding these issues, a shortage of gasoline and diesel restricted vehicle operations beyond the direct impact of the blockades. This fuel scarcity further pressured the commerce sector, which depends on fuel for merchandise distribution. While the extractive sector, particularly gold, silver, and tin mining, provided some support with positive growth in the first semester, cooperative mining activities were partially halted due to the conflicts. The BCB anticipates that transport and commerce services will continue a downward trend, and private consumption will remain limited by deteriorating employment and real income levels, which have not recovered since the COVID-19 pandemic.