IMF Staff Concludes Visit to Uruguay

IMF News, June 6, 2022

Source details

IMF mission led by Gustavo Adler visited Montevideo, Uruguay during May 30-June 3, 2022.
End-of-Mission press release: Press Release No. 22/182.
The mission will not result in a Board discussion.
Press officer: Maria Candia Romano; Phone: +1 202 623-7100; Email: MEDIA@IMF.org.
The views expressed are those of IMF staff and do not necessarily represent the views of the IMF’s Executive Board.
The IMF mission looks forward to further interactions in the context of the upcoming Article IV annual consultation, planned for late 2022.

Key findings:
- The economic recovery continues at a firm pace, supported by high agricultural commodity prices, recovering service sectors and strong investment.
- After growing 4.4 percent in 2021, Uruguay’s GDP reached pre-pandemic levels in late 2021.
- GDP is poised to continue growing at a firm pace in 2022 on the back of strong meat and grain exports and recovering service sectors.
External impact assessment:
- Direct trade with Russia and Ukraine is low; the war in Ukraine’s direct impact on Uruguay is expected to be limited.
- The drag from high oil prices is expected to be more than offset by expansionary effects of high agricultural commodity prices.
Short-term risks to growth:
- Potential disruptions in global fertilizers’ markets.
- Marked deceleration of global growth amid high energy costs, tightening global financial conditions and COVID-related dislocations.

Key findings:
- Inflation has drifted further away from the target range in recent months, driven by external inflationary pressures related to the global food and energy shock and domestic factors.
- Price pressures are broadening beyond food and energy items.
- Inflation expectations remain above the target range.
- Inflation is expected to exceed the central bank’s target range for some time.
Policy recommendations:
- Additional monetary tightening is needed to bring inflation within the target range.
- Further monetary tightening will be key to re-anchor inflation expectations, continue strengthening central bank credibility and durably reining in inflation over the monetary policy horizon.
Recent stance:
- Following the gradual withdrawal of monetary policy stimulus since mid-2021, the latest interest rate hikes have turned monetary policy moderately contractionary.

Key findings:
- Amid a well-advanced recovery, conditions are appropriate for further fiscal consolidation efforts while supporting the most vulnerable to mitigate the impact of the food and energy price shock.
- The authorities intend to continue with prudent fiscal policy to rebuild buffers that would allow addressing future shocks.
- Progress made on the fiscal framework, including the implementation of the Fiscal Council, is commendable.
Policy recommendations and priorities:
- Continue prudent fiscal consolidation while maintaining well-targeted temporary measures to mitigate the impact of the inflationary shock and the pandemic on the most vulnerable.
- Reform the pension system and pursue improvements in education to boost medium-term growth, safeguard fiscal sustainability and ensure inter-generational equity and social cohesion.

The IMF mission thanked the authorities for their hospitality and fruitful discussions.

IMF Staff Concludes Visit to Uruguay — Press Release No. 22/182 (June 6, 2022).