Brazil & Southern Cone - March 2016 (ISSN 1741-4431)

On 26 February a mission from the International Monetary Fund (IMF) concluded its two-week annual visit to Paraguay as part of its Article IV consultation agreement with the South American country. The mission, led by Hamid Faruqee, concluded: “Against a backdrop of a prolonged regional [economic] slowdown, Paraguay’s economy remains relatively resilient. We expect growth at around 3 percent this year and next, reflecting sound macroeconomic fundamentals, lower oil prices and vibrant construction [sector] activity”. The IMF’s latest forecast is down from 3.8% previously. Faruqee noted that downside risks, such as “the fall in agricultural commodities and the economic weaknesses of [Paraguay’s] trade partners, including the deep recession in Brazil”, had increased. He said that the current “temporarily high” level of inflation, of around 3% in January, was due to volatility in food prices resulting from the fall in oil prices and the depreciation of the Guaraní against the US dollar. However, the IMF expects inflation to remain under the 4.5% target set by the central bank (BCP). The BCP now expects real GDP growth of 3%-3.5% in 2016.

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