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During the last two decades, Paraguay has experienced robust economic growth thanks to favorable terms of trade that have led to improvements in the prices of the country's exported products and solid macroeconomic policies, including institutional reforms such as the inflation targeting mechanism and fiscal responsibility legislation.

However, droughts that affected agricultural and hydroelectric energy exports and the COVID-19 pandemic have impacted growth in recent years, reducing the average GDP growth from 4.4% between 2003 and 2018 to 1.1% between 2019 and 2022. 

A growth rate of 4.8% is projected for 2023, with 4.0% growth expected for 2024 and 2025. This indicator reflects anticipated progress in large private investment projects, positive agricultural and hydroelectric energy export results, and increased private consumption due to inflation moderation.

Regarding poverty rates (using the international poverty line of $6.85 per capita/day at PPP 2017), it stands at 20%, returning to pre-pandemic levels. However, drought, high inflation (9.8%), and reduced economic assistance to the most vulnerable populations due to the pandemic have caused extreme poverty (approximated by the international poverty line of $3.65 per capita/day at PPP 2017) to increase from 4.1% in 2021 to 5.6% in 2022. 

While macroeconomic stability is highly valued, Paraguay faces significant challenges. Using pre-pandemic data, the World Bank's Human Capital Project estimated that a child born in Paraguay in 2020 would only achieve 53% of the productivity they could have reached with full access to health and education. This result is lower than regional and high-income middle countries averages. According to international standardized tests like PISA, in 2022, over 85% of 15-year-old Paraguayan students did not reach the minimum levels of proficiency in mathematics, 66% in reading, and 71% in science.

The high vulnerability of the Paraguayan economy to meteorological phenomena requires special attention. In the future, events such as droughts, floods, and storms are expected to become more frequent and intense due to climate change, requiring structural changes to increase productivity and resilience. To achieve this, it is essential to strengthen governance, enforce regulations, and invest in human capital and infrastructure, especially to adapt to climate change and seize opportunities for a more sustainable growth transition. To finance these and other investments, Paraguay needs to mobilize sufficient resources reasonably and efficiently, improve the quality of public spending, and enhance conditions to attract more private investment. 

Last Updated: Dec 19, 2023


Paraguay: Commitments by Fiscal Year (in millions of dollars)*

*Amounts include IBRD and IDA commitments

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