Paraguay’s central bank raises 2026 growth forecast to 5% — The Rio Times

Paraguay’s central bank has raised its forecast for the country’s economic growth in 2026 from 4.5% to 5%. At the same time, the regulator lowered its inflation forecast for the end of 2026 from 3.3% to 3%, The Rio Times reports. Banco Central del Paraguay released the updated estimates on October 16 in its quarterly IPoM monetary policy report.

The 3% inflation forecast is below the central bank’s 3.5% target. For 2027, the regulator expects inflation at 3.5%, while core inflation in 2026 is estimated at 2.2%.

What supported the forecast revision

The increase in the growth forecast is primarily linked to expectations for industry, services, and exports. The forecast for the secondary sector, which includes manufacturing, construction, and energy, rose from 4.6% to 5.7%. Expectations for the electricity and water supply sector were raised from 7.4% to 12.8%.

The services sector, which accounts for 48.9% of economic output, is expected to grow by 5% rather than the 4.6% projected in June. The trade growth forecast was raised from 3.5% to 5.1%, while that for public administration was increased from 2.6% to 4.1%.

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At the same time, the forecast for the primary sector was lowered from 3.8% to 2.9%. Livestock production is expected by the bank to decline by 4.5%. Cattle slaughter over nine months amounted to 1,363,697 head, compared with 1,735,841 a year earlier.

Rate and economic indicators

The central bank kept its key rate at 5.5%, describing this monetary stance as neutral. Previously, the rate was cut from 6% to 5.75%, and later to 5.5%.

According to the bank, Paraguay’s GDP grew by 4% year-on-year in the second quarter after growth of 7.3% in the first quarter. The average increase in the IMAEP economic activity index in July and August was 6.1%. Exports rose by 11.5% in the second quarter, while gross capital formation declined by 18.2%.

The regulator also cited an escalation of the conflict in the Middle East, disruptions at oil refining facilities, and the strengthening of the U.S. dollar among external risks. According to the publication, the International Monetary Fund forecasts Paraguay’s economy to grow by 4.5% in 2026 and by 4% in 2027.