March 26, 2013 / 7:16 PM / 4 years ago

Paraguay economy contracted in fourth quarter, hit by drought

2 Min Read

* Poor soybean harvest sank agricultural production

* Economy seen rebounding 10.5 percent in 2013

ASUNCION, March 26 (Reuters) - Paraguay's economy contracted 0.4 percent in the fourth quarter from a year earlier and shrank 0.5 percent versus the previous quarter, reflecting a drought that slashed soy production, the central bank said on Tuesday.

A poor, landlocked nation in the heart of South America, Paraguay is the world's No. 4 soybean exporter, although it lags far behind the top three global suppliers.

The central bank maintained its estimate for a 1.2 percent economic contraction in 2012 and said it will release a final figure next month. It said the accumulated figure during the four quarters of last year showed a 0.9 percent decline in gross domestic product (GDP).

Agricultural production sank 29 percent year-on-year in the fourth quarter as dry conditions shriveled the soy crop, the country's top export. Soy shipments plunged 77 percent from a year earlier, dragging overall exports down 3.9 percent.

This was somewhat offset by a 22.6 percent increase in cattle ranching and a 9.7 percent rise in manufacturing and mining.

Paraguay's ranching sector rebounded after suffering a costly outbreak of foot-and-mouth disease in late 2011, with exports to markets such as Russia and Brazil growing again.

Private consumption was flat in the fourth quarter from a year earlier while public-sector consumption grew 15.5 percent and investments expanded 0.7 percent.

The central bank revised its previous quarterly figures, saying GDP contracted 2.8 percent year-on-year in the first quarter and 2.2 percent in the second quarter. It then grew 2.0 percent in the third quarter.

Paraguay's economy is seen expanding by a robust 10.5 percent in 2013, thanks in part to a record soy harvest.

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