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International Monetary Fund. Western Hemisphere Dept.
After two consecutive years of GDP decline driven by external shocks, Paraguay’s economy rebounded in 2021. In 2019, drought and flooding reduced economic growth to -0.4 percent. In 2020, the impact of the pandemic on the secondary and tertiary sectors was partly compensated by a rebound of agriculture and an extensive emergency package, and GDP fell by only 0.8 percent. Growth rebounded to 4.2 percent in 2021, but heatwaves and a severe drought decelerated the recovery and have limited 2022 growth prospects, though a recovery is projected for 2023 and the medium-term. While the loss of agricultural export revenue is affecting Paraguay’s balance of payments in 2022, the external position in 2021 was stronger than the level implied by fundamentals and desirable policies.
International Monetary Fund. Western Hemisphere Dept.

costs, and electricity production. These factors have been aggravated by the supply shock triggered by the war in Ukraine, given Paraguay’s dependence on imports of oil and derivatives. 4 Staff projects GDP growth at 0.3 percent for 2022, a 4.5 percent rebound in 2023, and 3.5 percent growth over the medium-term. The recent sharp increases in international fuel and food prices exacerbate inflation risks. Inflation is projected to converge back to the authorities’ target of 4 percent by end-2023, but end-2022 inflation would be above the central bank’s tolerance