Paraguay’s country risk decreases at the beginning of April – Consultancy

RIO DE JANEIRO, BRAZIL – At the beginning of April, Paraguay’s country risk decreased with respect to the latest data of February, in line with the average of Latin American countries, and is located around 210 basis points above the US treasury bonds, according to the consulting firm Grant Thornton Paraguay, in its report “Coyuntura Económica de Paraguay Abril 2021” (Paraguay’s Economic Situation April 2021).

The Public Accounts section also highlighted that the fiscal deficit fell in February to 5.9% of GDP. The drop is explained by the decrease in the primary deficit, which stands at 4.8% of GDP, while interest payments correspond to 1.1% of GDP.

Gross debt grew and reached 35.2% of GDP in January. Due to the high level of international reserves -equivalent to 27.3% of GDP-, net debt represents only 7.9% of GDP.

Read: Paraguay and Chile continue to be the South American countries with the lowest indebtedness

Regarding Paraguay’s economic activity, the consultancy highlights that the economy fell by 0.6% in 2020, driven by growth in agriculture (+9.1%) and construction (+12.6%), which offset the 3.3% drop in the services sector. According to the consultant’s estimates, a growth of 3.8% is expected in 2021 and 4.0% in 2022.

In the fourth quarter, construction (+18.1%), manufacturing (3.1%), and livestock (+3.1%) grew. Agriculture and electricity, and water fell 3.8% and 3.0%, respectively, while services recovered and reduced their year-on-year decline to 0.8%. Investment (+11.5%) and private consumption (which reduced its year-on-year decline to 1.9%) continued to recover in the last quarter while exports of goods and services continue to be affected and are 7% below the same quarter of 2019.

Source: Agriculture and livestock saved Paraguay during pandemic

On the other hand, in its monetary section, it mentions that inflation stood at 2.4% in March, with projections that place it at 3.3% by the end of 2021 and 3.9% in 2022. The largest increases were in Food and Non-Alcoholic Beverages (4.3%) and Health (4.4%).

On the other hand, in March, the average exchange rate projections are 6,540 Guarany per US dollar at the end of 2021 and 6,800 by the end of 2022. The Real Effective Exchange Rate deteriorated to 5% below the average recorded since 1995.

In the fourth quarter, employment continues to recover (from 64.9% to 67.2%) although it is still below the pre-pandemic level. The rates of unemployed and underemployed fall to 7.2%, although they remain above the levels of late 2019.

Source: La Nacion