Overview: Paraguay

The COVID-19 pandemic hit Paraguay’s economy very hard and just when the country was recovering after a period of stagnation (-3% year-to-date in the first half of 2019). 2019 wasn’t a good year for employment either, the combined unemployment and underemployment rate reaching 14.5% in the first half of the year and retracting to 12.9% in the second half. This favorable path continued during the first two months of 2020 but with the beginning of COVID in March, began to slow down. Social distancing measures have most severely affected the service sector although informal labor was also badly affected.

The Government and the Paraguayan Central Bank (BCP) adopted a series of exceptional measures to address the economic and financial needs of both individuals and companies. In this regard it’s worth mentioning the BPC’s decision to reduce the policy interest rate by 175 basis points to 2.25% and the temporarily relaxed provisioning rules not to penalize credit restructurings and prolongations as well as the Government’s anti-crisis fiscal package approved by Parliament.