IMF's 'yellow light' on consumption and credit growth demands attention, analyst warns

Paraguay's economy is experiencing robust growth, with estimates between 4% and 6% annually. However, a significant acceleration in consumer credit, particularly credit card usage, is raising alarms among financial analysts and international bodies like the IMF.

Consumer credit has surged by over 40% year-on-year, reaching G. 35.52 trillion by May. Credit card limits, especially smaller ones up to G. 3 million, have seen a 50% increase. This trend suggests that many families are increasingly relying on credit to cover essential expenses like groceries and transportation, a situation described as "swiping cards to survive."

“

The IMF warning should be interpreted as a “yellow light” that requires attention.

Financial analyst Amílcar Ferreira characterized the IMF's warning as a "yellow light," emphasizing that the rapid growth of household debt outpaces economic expansion. This disparity signals potential vulnerability and could lead to widespread over-indebtedness and defaults if not managed carefully. Ferreira pointed out that families may be struggling to make ends meet, resorting to credit cards to maintain their consumption levels.

The situation highlights a potential disconnect between the overall economic performance and the financial health of households. While the economy grows, a growing segment of the population appears to be facing financial strain, making them susceptible to economic shocks.

“

Apparently, there are families that are not making it to the end of the month and are resorting mainly to credit cards to sustain their consumption levels.