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Fitch Ratings confirms Paraguay's rating at ‘BB+’ with stable outlook
(MENAFN) Fitch Ratings has reaffirmed Paraguay's long-term foreign currency issuer default rating at ‘BB+’ with a stable outlook. The rating agency highlighted that Paraguay's strong rating is underpinned by the country's consistent macroeconomic policies, low levels of government debt, and solid external liquidity. These positive factors contribute to the country's overall economic stability and resilience.
However, Fitch also noted several challenges that temper the positive aspects of Paraguay's rating. These include weak governance indicators, a limited revenue base, and a shallow local capital market that restricts the country's fiscal financing flexibility. Additionally, Paraguay's susceptibility to adverse climatic shocks poses a significant risk to its economic stability. These vulnerabilities underscore the need for continued reforms and improvements in governance and fiscal management.
In its assessment, Fitch projected that Paraguay's real GDP growth would reach 4.5 percent in 2023, slightly lower than the 4.7 percent growth recorded in the previous year. The agency anticipates that real GDP will maintain the same growth rate of 4.5 percent in both 2025 and 2026. This expectation reflects a shift in the drivers of economic growth; while 2023's growth was largely fueled by a rebound in agriculture and electricity production following a drought, the forecast for 2024 indicates that growth will be more reliant on the manufacturing and services sectors.
Fitch emphasized that significant investments in various sectors are supporting Paraguay's economic diversification. This diversification is crucial for enhancing the country's resilience against climate-related risks, which can have profound impacts on its agricultural and overall economic performance. By broadening its economic base, Paraguay aims to mitigate its vulnerability to external shocks and ensure sustainable growth in the years to come.
However, Fitch also noted several challenges that temper the positive aspects of Paraguay's rating. These include weak governance indicators, a limited revenue base, and a shallow local capital market that restricts the country's fiscal financing flexibility. Additionally, Paraguay's susceptibility to adverse climatic shocks poses a significant risk to its economic stability. These vulnerabilities underscore the need for continued reforms and improvements in governance and fiscal management.
In its assessment, Fitch projected that Paraguay's real GDP growth would reach 4.5 percent in 2023, slightly lower than the 4.7 percent growth recorded in the previous year. The agency anticipates that real GDP will maintain the same growth rate of 4.5 percent in both 2025 and 2026. This expectation reflects a shift in the drivers of economic growth; while 2023's growth was largely fueled by a rebound in agriculture and electricity production following a drought, the forecast for 2024 indicates that growth will be more reliant on the manufacturing and services sectors.
Fitch emphasized that significant investments in various sectors are supporting Paraguay's economic diversification. This diversification is crucial for enhancing the country's resilience against climate-related risks, which can have profound impacts on its agricultural and overall economic performance. By broadening its economic base, Paraguay aims to mitigate its vulnerability to external shocks and ensure sustainable growth in the years to come.
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