Top IMF economist reviews Western Hemisphere’s economic situation
Friday, November 7th 2025 – 12:01 UTC
Nigel Chalk reviewed Paraguay’s case while the IMF was launching the latest edition of its Economic Outlook for the Americas
In an interview with Asunción’s Última Hora, Nigel Chalk, Director of the Western Hemisphere Department at the International Monetary Fund (IMF), highlighted the importance of fiscal consolidation and structural reforms to bolster resilience and growth potential, particularly amid shifting global conditions. The interview coincided with the launch of the IMF’s Economic Outlook for the Americas report.
Chalk noted that the new economic order faced increased US tariffs and stricter immigration policies. While global uncertainty remains high, the overall impact on Latin America has been mitigated by the region’s relatively low trade exposure to the US market, excluding Central America and Mexico. Additionally, recent volatility has subsided, with sovereign spreads falling, regional currencies recovering, and commodity prices stabilizing.
Thus, regional growth remained stable in the first half of 2025, driven by international trade and solid consumption. The IMF forecasts regional growth of 2.4% for 2025, with a slight moderation expected in 2026.
Convergence towards inflation targets is continuing, albeit at a slower pace due to rising labor costs and stubborn core inflation. Regional inflation is expected to stabilize this year and trend down to 3.5% in 2026. In this context, Paraguay is singled out as a positive case. It was the first country in the region to converge to its previous 4% inflation target and is expected to see accelerating growth in 2025, driven by strong internal demand. The CPI is projected to grow by 3.5% in 2026.
Chalk identified key risks threatening the region’s outlook, which are collectively skewed downward, amid weaker-than-expected growth in major global economies, which could hurt exports, tourism, and remittances, coupled with supply chain disruptions and rising trade barriers that could discourage investment. Moreover, favorable financial conditions could reverse if risks materialize, restricting external financing, especially for highly indebted countries. To bolster resilience, the most urgent policy challenge is fiscal consolidation to reduce high public debt levels. This is crucial for restoring policy buffers and facilitating inflation convergence, as fiscal policy has remained expansionary since 2022 despite monetary tightening.
In contrast to the regional trend of slow consolidation, Paraguay is successfully implementing a fiscal convergence plan. It is expected to return to its Fiscal Responsibility Law deficit limit of 1.5% of GDP in 2026 for the first time since 2018, leading to a decreasing public debt-to-GDP ratio.
Chalk emphasized that Paraguay’s fiscal discipline has been an ally of monetary policy and has helped maintain stable inflation. Paraguay maintains a robust medium-term growth outlook, driven by macroeconomic stability and ongoing structural reforms that are strengthening the country’s image as an attractive destination for investment. The IMF Director warned that smuggling and drug trafficking) pose a significant obstacle to growth by undermining investment and productivity. Criminality imposes substantial costs on businesses and public finances, diverting resources away from other priorities. Addressing this requires a comprehensive policy response combining macroeconomic stability, inclusive growth, stronger institutions, and increased regional cooperation. (Source: Última Hora)
