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Investing.com -- Fitch Ratings has revised Paraguay’s outlook to positive from stable while affirming its Long-Term Foreign Currency Issuer Default Rating at ’BB+’.
The outlook revision reflects Paraguay’s strong growth performance and prospects driven by a robust investment pipeline, low fiscal deficits, and an expected decline in public debt. It also acknowledges the country’s active economic reform agenda and gradual reduction in the high foreign currency share of government debt.
Fitch forecasts Paraguay’s economy will grow 4.8% in 2025, marking the third consecutive year with growth rates above private sector estimates of potential (3.5%-3.8%), up from 4.2% in 2024. Growth in the first half of 2025 reached 5.9% in both quarters, driven by services, manufacturing, and construction despite declining agricultural output.
The country has a large investment pipeline totaling 16% of projected 2025 GDP across various sectors. Major projects include the Paracel pulp mill (estimated at $3.8 billion, 8% of GDP) and the ATOME fertilizer plant (2.2% of GDP), with the latter recently securing a 10-year purchase agreement.
Inflation has remained relatively stable, averaging 4.1% through September, though it rose to 4.3% in September due to seasonal factors affecting food prices. The monetary policy rate has remained at 6% since March 2024.
The government is on track with its fiscal consolidation plan, targeting a 1.9% of GDP deficit this year and a return to the 1.5% deficit limit next year. Government debt likely peaked at 37.8% of GDP in 2024 and is forecast to fall to 35% in 2025 and 34% by 2027.
Paraguay has reduced its foreign currency government debt share to 84.2% as of August, down from 90% at the end of 2023, partly through the issuance of global guarani bonds worth $600 million in February.
The Peña administration has approved more than 20 reforms in its first two years and recently presented 10 additional reforms, including new tax incentives for foreign investment and revisions to the maquila sector tax regime.
Despite wider current account deficits, which reached 3.9% in 2024, external liquidity buffers remain strong with international reserves covering 5.8 months of current external payments, above the ’BB’ median of 4.8 months.
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