In brief
The president, Santiago Peña of the right-wing Partido Colorado (PC), will pursue broadly orthodox economic policies and a market-friendly, export-oriented agenda in 2024-28. Paraguay's sound macroeconomic fundamentals, low-tax environment and open policy towards foreign investment will result in more public-private partnerships in agriculture, energy and infrastructure. However, increased perceptions of corruption and cronyism in the public sector will generate concerns about contract rights and the rules of the game, precluding more robust investment growth over the medium to long term. Domestically, the PC benefits from powerful political machinery and a majority of seats in both houses of Congress, but fierce rivalry between different factions of the party will create complications in passing legislation, sustaining risks to governability.
An immediate policy priority will be the renegotiation of a recently expired treaty with Brazil that governs the price of energy generated at the Itaipú hydroelectric dam. A disappointing deal for Paraguay could stoke social unrest and put political stability at risk. Unfavourable Itaipú terms negotiated under previous administrations triggered disruptive protests and even impeachment attempts; we think that Mr Peña would face similar risks if he fails to secure a better deal. After surging in 2023 on the back of drought relief, real GDP growth will moderate slightly this year, although disinflation and a monetary-easing cycle will keep a floor under economic activity.
Read more: What lies ahead following Peña's first 100 days?
Read more: Disagreements over Itaipú will strain Brazil-Paraguay ties
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What lies ahead following Peña’s first 100 days?
Economic growth
(% unless otherwise indicated) | |||
2023 | 2024 | 2025 | |
---|---|---|---|
US GDP | 2.5 | 1.8 | 1.6 |
Developed economies GDP | 1.5 | 1.4 | 1.6 |
World GDP | 2.5 | 2.4 | 2.6 |
World trade | -0.3 | 2.4 | 3.3 |
Source: The Economist Intelligence Unit |