## IMF Staff Concludes Visit to Paraguay

_IMF News, November 15, 2018_

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## Bibliographic details
- Published: November 15, 2018

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### Economic performance
- GDP is likely to grow by around 4¼ percent this year.
- Paraguay has grown at an average rate of 4½ percent since 2003.
- Inflation, at around 4 percent, is near the mid-point of the central bank’s target range.
- The depreciation of the guaraní vis-à-vis the dollar this year has been modest compared with other countries in the region.
- The strong performance reflects both the commodity-price boom and consistently prudent macroeconomic policies.

### Growth outlook and risks
- IMF projection: growth of 4 percent in 2019, and similar growth rates over the medium term.
- Downside risks stem from external developments, including economic developments in Brazil and Argentina.
- Paraguay has demonstrated resilience to past recessions in these neighboring countries.

### Monetary and credit conditions
- Policy rate is 5¼ percent, described as supportive.
- Credit growth has accelerated and is now growing by 14 percent year on year, boosting domestic demand.
- Monetary policy will need to balance supporting the economy and preventing overheating.

### Fiscal policy
- Fiscal policy remains well anchored by the fiscal responsibility law (FRL).
- The proposed 2019 budget targets a deficit of 1½ percent of GDP, which is in line with the FRL’s ceiling.
- Achieving the target requires keeping spending growth in line with revenue increases.

### Structural reforms and inclusivity
- Sustaining rapid and inclusive growth requires shifting from extensive growth to intensive growth based on productivity increases.
- Government actions recommended to foster private investment and productivity:
  - Address large infrastructure gaps (including through PPPs).
  - Improve governance and transparency.
  - Reform the justice system.
  - Provide more effective public services in health and education, where Paraguay trails.
  - Implement policies to make growth more inclusive to address income and wealth inequality.
  - Strengthen the financial sector, including reforming the pension system while the population is still young, to support the private sector and mobilize private savings.

### Revenue, fiscal space, and resource use
- Some reforms will require additional resources.
- Options to broaden fiscal space without raising tax rates:
  - Broaden the tax base by reducing exemptions and boosting compliance.
  - Increase non-tax revenue, including from the upcoming revision of the Itaipú treaty.
  - Use existing funds more efficiently to expand the fiscal envelope for reforms.

### Mission engagement
- The IMF staff team led by Mr. Bas Bakker visited Asuncion during November 12-15, 2018 to discuss recent economic developments and policies.
- The mission met with government officials, private sector representatives and academics.
- The mission thanked the authorities for their hospitality and fruitful discussions.

*Source: IMF Staff Concludes Visit to Paraguay (Press Release No. 18/427, November 15, 2018).*

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## References

- [Argentina and the IMF](http://www.imf.org/external/country/ARG/index.htm)
- [Brazil and the IMF](http://www.imf.org/external/country/BRA/index.htm)
- [Paraguay and the IMF](http://www.imf.org/external/country/PRY/index.htm)
- [Press Releases](https://www.imf.org/en/news/searchnews)
- [PRESS CENTER](http://presscenter.imf.org/)
- [https://www.imf.org/en/home](https://www.imf.org/en/home)

_Source: https://www.imf.org/en/news/articles/2018/11/15/pr18427-imf-staff-concludes-visit-to-paraguay_