The Central Bank of Paraguay (BCP) has forecast a Gross Domestic Product (GDP) growth of 4.2% for the year 2026, underpinned by expansions across all three major sectors of the economy. In addition, Paraguay’s Central Bank latest Monetary Policy Report indicates that inflation for the year is projected to align with the target of 3.5%, signalling a period of stable economic performance.
According to the report, the positive outlook is not reliant on a single area of the economy. Instead, the projected growth is expected to be broad-based, with the primary, secondary, and tertiary sectors all contributing to the expansion. This balanced development suggests a resilient and diversified economic structure moving forward.
A detailed look at sectoral growth
The tertiary sector, which encompasses services, is anticipated to lead the expansion with a projected growth rate of 4.6%. The central bank attributes this strong performance primarily to the expected positive dynamics within commerce and the component “other services.” This sector is crucial for employment, and reflects consumer confidence and business activity within the domestic market.
Meanwhile, the secondary sector, which includes industrial activities, is forecast to grow by a robust 4.0%. This figure is supported by positive expectations across its key components. Manufacturing industries are projected to expand by 3.7%, while the construction sector is expected to grow by 3.5%. Furthermore, the electricity and water sub-sector is set for a significant expansion of 5.7%, indicating strong underlying demand from both industries and households.
Stable outlook for the primary sector
The primary sector, which is fundamental to Paraguay’s economy and includes agriculture and raw materials, is estimated to grow by 2.4%. This expansion is in line with the expected performance of agriculture, livestock, and other related activities. A steady performance in this sector is vital for export revenues and rural economic stability, providing a solid foundation for the broader economy.
The collective projections across these three sectors paint a picture of a well-rounded economic expansion for 2026. The simultaneous growth prevents over-reliance on any single area, thereby reducing vulnerability to sector-specific shocks, and contributing to a more sustainable economic trajectory for Paraguay.
Inflation expected to remain on target
Regarding price stability, the central bank’s analysis of the main determinants of inflation offers a reassuring outlook. The report states that there is currently no evidence of significant pressures that could divert inflation from its predicted path. This assessment provides a degree of certainty for businesses and consumers when making financial plans for the future.
Under a scenario without any major economic shocks, the BCP predicts that year-on-year inflation will continue to moderate throughout much of 2026. Consequently, it is expected to converge towards the official target of 3.5% by the end of the year. This managed inflation environment is essential for preserving purchasing power and fostering investment.
Analysis of internal and external factors
On the domestic front, the report projects that the nation’s GDP will remain close to its potential level. This condition is important because it limits the generation of significant demand-side inflationary pressures. When an economy operates near its full capacity without overheating, it can sustain growth without triggering a rapid rise in prices, which is a key goal of monetary policy.
From an external perspective, the central bank does not anticipate significant inflationary pressures stemming from international factors. The report notes that the output gap of Paraguay’s main trading partners is not expected to create price pressures. Similarly, the evolution of international prices for food and energy commodities is also forecast to remain stable, further contributing to the controlled inflation outlook and shielding the domestic economy from imported inflation.
More Economy: Following Moody’s, S&P Upgrade Delivers Paraguay Second Investment Grade.
