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Paraguay Economic Outlook. Second half 2015

Por , , ,

In a deteriorating international environment, the rate of expansion of the Paraguayan GDP has moderated in the past few months and we expect that it will expand 3.2% in 2015. For 2016, in a challenging context, we forecast a growth of 3.4% where domestic demand will be the main driver, so the economy will remain among the most dynamic in the region.

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Geografías:Paraguay
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1. Overview

Por , , ,

In a deteriorating international environment, the rate of expansion of the Paraguayan GDP has moderated in the past few months and we expect that it will expand 3.2% in 2015. For 2016, in a challenging context, we forecast a growth of 3.4% where domestic demand will be the main driver, so the economy will remain among the most dynamic in the region.

Unidades:
Geografías:Paraguay


2. Slower global growth in 2015 and a limited improvement in 2016

Por , , ,

The global context continued to deteriorate in the past few months, including further weakness in the Chinese economy, which along with the start of the upward cycle of Fed’s interest rates has led to a further decline in commodity prices. We estimate that global GDP will increase in 3.2% in 2015 and 3.5% in 2016.

Unidades:
Geografías:Paraguay


3. Paraguay: growth of over 3% in 2015 and 2016

Por , , ,

The rate of expansion of the Paraguayan GDP has moderated in the past few months and we expect that it will expand 3.2% in 2015. For 2016, in a challenging context, we forecast a growth of 3.4%, where domestic demand will be the main drive , so the economy will remain among the most dynamic in the region.

Unidades:
Geografías:Paraguay


4. Less depreciation of the PYG, with bouts of volatility

Por , , ,

The local currency has depreciated around 21% so far this year and we expect that it will continue to weaken in the coming months (trend observed throughout the region). Going forward, we estimate that the exchange rate will depreciate at a much slower pace, reflecting the weakening of the fundamentals.

Unidades:
Geografías:Paraguay


5. Inflation contained within the central bank’s target band

Por , , ,

The path of inflation has been consistent with the objective and we expect that this will continue in the remainder of this year and during 2016.

Unidades:
Geografías:Paraguay


6. Market interest rates are converging towards the monetary policy rate

Por , , ,

Currently the monetary policy rate remains at 5.75% since July. Our forecast considers that the Central Bank will keep the rate at the current level until the end of 2016. Going forward, we expect a gradual increase in the monetary policy rate, consistent with the acceleration of GDP growth.

Unidades:
Geografías:Paraguay


7. Deeper recession in Brazil is the main source of downside risk

Por , , ,

Deviations in the evolution seen in our baseline scenario for several key variables for the external and local side could set a more challenging environment for the Paraguayan economy in the upcoming months. However, it is important to see that Paraguay has strengths to limit the potential impacts of more adverse scenarios.

Unidades:
Geografías:Paraguay




9. Box 1. Commodity prices: soybeans and oil

Por , , ,

So far this year, there have been strong slowdowns on the commodities, as soybean and crude oil. However, a slight recovery is expected in these prices: i) soybean, in a context where the supply adjustments will marginally offset with a weaker demand and, ii) crude oil, it will converge to a level around USD/bbl 65 in 2017.

Unidades:
Geografías:Paraguay


10. Box 2. What would be the impact on Paraguay of a harder landing for China?

Por , , ,

A more marked slowdown in China would affect Paraguay through: (i) a direct way , by further falls in the price of soybeans and ( ii ) indirectly, by a weaker external demand in Brazil (heavily exposed to China). Both effects will reduce about 1.4 p.p. of the 2016’s GDP growth compared to the baseline scenario.

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Geografías:Paraguay

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