IMF raises Paraguay's economic growth projection to 4.4% but warns of risks

The International Monetary Fund (IMF) has increased its growth forecast for the Paraguayan economy, projecting a 4.4% expansion for 2026. This upward revision, from a previous estimate of 4.2%, is attributed to stronger outlooks for consumption and investment. The IMF expects Paraguay's economy to maintain a "solid" performance in the coming years, with inflation expected to align with targets by 2026.

The IMF's report, based on its regular Article IV consultation, assesses the balance of risks as generally "balanced." The projected medium-term growth rate is an average of 3.8%, supported by robust private consumption and strong investment. The organization notes that Paraguay's economy has largely remained insulated from the effects of the Middle East conflict, primarily due to its energy matrix, which relies entirely on renewable sources, and the favorable performance of soybean production and prices.

Despite the positive outlook, the IMF report identifies several downside risks that could impede growth. These include potential meteorological disturbances, which are particularly sensitive for an agriculture-dependent economy, and the possibility of a prolonged war in the Middle East. Additionally, fiscal challenges and the management of public finances remain areas of concern that could impact the country's economic trajectory. The IMF anticipates a gradual reduction in the current account deficit in the medium term as new export capacity comes online, which should improve the external balance over time.