The Balance of Trade (BoT) for PY in October 2025 posted a deficit of -191.66 million PYG, a significant narrowing from September’s -613.19 million PYG and well above the six-month average of approximately -523 million PYG. This improvement marks a positive shift after a series of deepening deficits earlier in the year, with the worst recorded in August at -841.10 million PYG.

Drivers this month

• Export growth accelerated by 7.20% MoM, driven by agricultural commodities and manufactured goods.
• Imports contracted by 4.50%, reflecting subdued domestic demand and tighter credit conditions.
• Commodity price stabilization globally helped reduce import costs.

Policy pulse

Monetary tightening by PY’s central bank, with a 50 basis point hike in the policy rate last quarter, has started to temper import-driven inflation. The trade deficit’s contraction aligns with the central bank’s inflation target of 3.50%, as import demand cools and the currency stabilizes.

Market lens

Immediate reaction: The PYG/USD exchange rate strengthened 0.30% within the first hour post-release, reflecting improved external balances and investor confidence. Short-term yields on government bonds edged lower, signaling reduced risk premia.

Examining core macroeconomic indicators alongside the BoT reveals a mixed but cautiously optimistic environment. GDP growth for Q3 2025 was revised upward to 2.80% YoY, supported by export-led manufacturing and services. Inflation remains contained at 3.70% YoY, slightly above target but trending downwards.

Monetary Policy & Financial Conditions

The central bank’s recent rate hikes have increased borrowing costs, dampening import demand and credit growth. The real effective exchange rate appreciated by 1.20% over the past month, improving trade competitiveness. Financial conditions remain moderately tight but supportive of external balance improvement.

Fiscal Policy & Government Budget

Fiscal consolidation efforts continue, with the government reducing the budget deficit to 3.20% of GDP in Q3 2025, down from 4.10% a year earlier. Lower public spending on subsidies and improved tax collection have freed resources to support export sectors indirectly.

External Shocks & Geopolitical Risks

Global commodity price volatility has eased, reducing external shocks to PY’s trade balance. However, ongoing geopolitical tensions in neighboring regions pose risks to supply chains and export routes, warranting close monitoring.

Market lens

Immediate reaction: The PYG currency appreciated 0.30% against the USD, and 2-year government bond yields fell by 8 basis points, indicating improved investor sentiment and lower perceived external vulnerability.

Looking ahead, PY’s trade balance trajectory depends on several factors, including global demand, commodity prices, and domestic policy effectiveness. We outline three scenarios with assigned probabilities:

Bullish scenario (30%)

• Global demand strengthens, boosting exports by 10% YoY.
• Commodity prices remain stable or rise moderately.
• Monetary policy maintains a balanced approach, supporting growth without stoking inflation.
• Trade deficit narrows further to below -100 million PYG by Q1 2026.

Base scenario (50%)

• Exports grow moderately at 5% YoY, imports stable.
• Commodity prices fluctuate but remain within recent ranges.
• Monetary and fiscal policies continue gradual tightening.
• Trade deficit stabilizes around -200 million PYG over the next two quarters.

Bearish scenario (20%)

• Global slowdown reduces export demand by 5% YoY.
• Commodity prices fall sharply, increasing import costs.
• Geopolitical tensions disrupt trade routes.
• Trade deficit widens again beyond -400 million PYG by mid-2026.

Structural & Long-Run Trends

PY’s trade deficit has historically been volatile, influenced by commodity cycles and domestic policy shifts. The recent improvement may signal a structural adjustment toward more diversified exports and improved competitiveness. However, reliance on commodity exports remains a vulnerability. Continued investment in value-added manufacturing and export infrastructure is critical for sustainable external balance.

In summary, PY’s October 2025 Balance of Trade data marks a welcome improvement after months of deepening deficits. The narrowing gap reflects a combination of policy tightening, improved export performance, and favorable external conditions. While risks remain, especially from geopolitical uncertainties and commodity price swings, the current trajectory supports a cautiously optimistic outlook for PY’s external sector and broader macroeconomic stability.

Key Markets Likely to React to Balance of Trade

The Balance of Trade data typically influences currency, bond, and equity markets sensitive to external sector shifts. The following five symbols historically track PY’s trade dynamics closely:

• PYGUSD – The primary currency pair reflecting trade balance impact on exchange rates.
• EXPR – Export-oriented manufacturing stock sensitive to trade flows.
• IMPT – Import-dependent retail sector stock, affected by import cost changes.
• BTCUSD – A proxy for global risk sentiment, indirectly linked to trade and capital flows.
• USDPYG – Inverse of PYGUSD, also sensitive to trade balance shifts.

FAQs

What is the current Balance of Trade for PY?

The latest data shows a deficit of -191.66 million PYG for October 2025, a significant improvement from prior months.

How does the Balance of Trade affect PY’s economy?

The trade balance influences currency strength, inflation, and overall economic growth by affecting external demand and supply conditions.

What are the risks to PY’s trade outlook?

Risks include global demand shocks, commodity price volatility, and geopolitical tensions that could disrupt trade flows.

Key takeaway: PY’s trade deficit is improving, signaling better external balance and macro stability, but vigilance is needed amid external uncertainties.

This has been drafted with AI assistance and then thoroughly reviewed, refined, and approved by our human editorial team to ensure accuracy, and originality.

Updated 11/13/25