The years 2009, 2012 and 2019 are the most recent antecedents of stagflation in our country. The phenomenon is repeated in 2022 since the forecasts indicate that inflation will continue to rise and that the Gross Domestic Product would fall by 1.7%.
“The economy stagnates or decreases and inflation shoots up, it is the highest in recent years and hits above all the lowest social level,” explained economic analyst Amílcar Ferreira, in an interview with Hoy Digital.
The behavior of the Paraguayan GDP depends on three sectors: primary, secondary and tertiary, which form a pyramid that supports the local economy. However, the first, which is the heaviest, is badly beaten and will suffer heavy losses.
The primary is made up of agriculture and livestock. The soybean harvest will suffer a drop of 68.9%, since of the 9.5 million tons obtained in 2021, this year it will barely reach 3 million tons, according to the latest report issued by the Ministry of Finance. It is estimated that 2,000 million dollars would stop entering the country.
This setback happened due to the extreme drought that devastated the crops and prevented the expected harvest from being achieved. “Paraguay is a climate-dependent economy, when the soybeans that were sprouting in the fields were burned, that loss occurred,” he recalled.
Regarding livestock, the suspension of exports to Russia, -the second most important market for our country, with 20% of the total sent- the absence will also affect the meat sector, apart from attempts to enter other countries.
The secondary sector is made up of industry and border trade. The latter in turn depends on the economic situation of neighboring countries, mainly Argentina and Brazil.
“Argentina is very hit, that’s why few tourists come. Brazil did recover, tourists come to CDE and Pedro Juan, but it is still 25% below the previous volume”, commented Ferreira.
Fortunately, the industry recorded growth, mainly in the maquila area, with a 40% increase.
Parallel to the drop in the Gross Domestic Product, inflation is recorded, which according to the Central Bank of Paraguay, as of February 2022 reaches 9.3%, with an upward projection.
With the mixture of both forecasts, the drop in GDP and the growth of inflation, the phenomenon of stagflation will materialize, in this case the decrease in GDP plus the growth of inflation.
FUNCTION OF THE BCP
Although the Central Bank, through its monetary policy, can and should be in charge of controlling inflation to a certain extent, it lacks interference in external factors such as international oil today, which influences all other items and the chain productive in itself, which depends on fuel to move and function.
The tertiary sector: public and private works (which did not stop during the pandemic), services such as gastronomy, hotels, tourism, events, etc. They are the ones that this year would begin to recover slowly.
In summary, the secondary and the tertiary would grow, while the primary, the one with the largest volume in the pyramid, would fall. This explains the projection of a drop in GDP of 1.7%.
The entrance Stagflation, the phenomenon that hits Paraguay in 2022 was first published in diary TODAY.
