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Fiscal Discipline Aids Economic Reboud in Paraguay

Paraguay is set to achieve 5% GDP growth in 2023, as the landlocked South American country sees its agriculture output rebound amid continued improvement in foreign investment in its meat and pulp industries.

US rating agency Moody’s recently upgraded the country’s economic outlook from “stable” to “positive”, after appreciating Paraguay’s solid growth and prudent fiscal policy.

“Over the medium term, investment in infrastructure and renewable energy, as well as strong FDI investment will sustain GDP growth at around 4% annually,” stated the agency.

A country of 7.2 million people, Paraguay has achieved steady economic growth over the past several years, while managing to narrow its fiscal deficit. In recent months, has tried to carry out a string of fiscal reforms related to the civil service, public pension fund and public procurement.

These reforms would enhance its overall credit profile, paving the way for a higher rating in years to come, according to Moody’s.

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Unlike its neighbors, Paraguay does not have mineral resources. Low taxes, cheap electricity and plenty of fertile lands are its strength, with soybean and meat being the main source of dollars. A lack of skilled talent, poor infrastructure and deforestation are its challenges.

Paraguay was under a dictatorship for more than 30 years. Now, the country finds itself on a path of growth, largely due to its democratic rulers, who aim to maintain fiscal discipline.

Narayan Ammachchi

News Editor for Nearshore Americas, Narayan Ammachchi is a career journalist with a decade of experience in politics and international business. He works out of his base in the Indian Silicon City of Bangalore.

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