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Paraguay Economic Outlook First Half 2016

Por , , , , ,

Growth of around 3.0% in 2016 and 2017. Domestic demand, due to infrastructure projects, will be the main driver of growth. Lower depreciation of the currency but with episodes of volatility. Inflation will continue to be contained around the mid-range of the target. Central Bank would keep its policy monetary rate. Main risks: more pronounced slowdown in Brazil and China.

Unidades:
Geografías:Latam Paraguay
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1. Editorial

Por , , , , ,

Economic activity, measured by the IMAEP, remained at 1.3% in the first quarter, similar to the previous months. We anticipate, however, that the product will begin a process of gradual recovery, and thus 2016 GDP will record a growth around 3%. Domestic demand will be the main driver of this growth.

Unidades:
Geografías:Paraguay


2. Fragile global growth, dependent on China

Por , , , , ,

The available data for the first quarter of 2016 confirm our forecasts of growth stabilization in the world economy. This growth could slightly accelerate in the second quarter if signs of lower deterioration are consolidated, but still insufficient for the annual growth of the economy to be around 3.2%.

Unidades:
Geografías:Paraguay


3. Paraguay: we projected growth of around 3% for 2016 and 2017

Por , , , , ,

Economic activity started the year with a sluggishness. We anticipate, however, that from the second quarter, the product will begin a process of gradual recovery, and thus 2016 GDP will record a growth around 3%. Exports (soybeans and derivatives, electricity and meat) and domestic demand, by a higher construction will support the growth.

Unidades:
Geografías:Paraguay


4. We anticipate a more modest depreciation of the Guaraní

Por , , , , ,

The Guarani was recently strengthened, something that also happened with the currencies of other emerging economies. We believe that this is temporary and soon the local currency will return to its uptrend. Thus, the currency will be around to PYG 5 950 per USD towards the end of the year and closer to PYG USD 6 200 by the end of 2017.

Unidades:
Geografías:Paraguay


5. Inflation will remain close to the centre of the BCP target range

Por , , , , ,

Annual inflation registered significant increases compared to the rates implemented during 2015. However, it has begun to sag. We estimate that, in the remainder of the year, inflation will remain near the center of the target range and will close 2016 at around 4.7%.

Unidades:
Geografías:Paraguay


6. Central Bank eases stance of monetary policy

Por , , , , ,

In the context of moderating inflation, inflation expectations aligned to the goal and absence of demand pressures; the Central Bank will have more space to keep the policy rate at its current level (5.75 %) during 2016.

Unidades:
Geografías:Paraguay


7. The balance of risks on our growth projections for 2016-2017 has a negative bias

Por , , , , ,

Different paths to the baseline scenario for several key variables can divert our growth forecasts. We believe that the main sources of downward diversion are, on the external side, downside risks are Brazil and China; and on the home front, any delay in the execution of large infrastructure projects.

Unidades:
Geografías:Paraguay




9. Box 1. Updating of the potential growth of Paraguay

Por , , , , ,

For the next few years, in line with our macroeconomic projections, it is estimated that the contribution of both productivity and employment to the growth of potential GDP will stagnate at the low levels currently being recorded. Meanwhile, the contribution of capital (linked to investment) would still provide support to overall activity.

Unidades:
Geografías:Paraguay


10. Box 2. The importance of infrastructure development

Por , , , , ,

We anticipate that in the coming years the main driver of growth will be infrastructure construction. While the Paraguayan government has been developing a series of reforms to improve the investment climate and create a better institutional framework, there are crucial challenges ahead to reduce the gap in the existing infrastructure.

Unidades:
Geografías:Paraguay

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