## Five Takeaways from Uruguay's Economic Outlook

_IMF News, February 22, 2019_

## Source details

**Canonical URL:** [Five Takeaways from Uruguay's Economic Outlook](https://www.imf.org/en/news/articles/2019/02/15/na021319-five-takeaways-from-uruguay-economic-outlook)

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## Bibliographic details
- Published: February 22, 2019

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### Growth
- Over the last decade and a half, Uruguay’s economy has been resilient—helping to reduce poverty and raise incomes to one of the highest levels in the region.
- Recent moderation in growth reflects low private investment and net exports turning negative.
- Consumption continued to support domestic demand, while private investment has remained sluggish.
- A severe drought in the first quarter of 2018 led to lower yields of summer crops (particularly soybeans).
- Growth is projected to be close to 2 percent in 2018 and 2019.
- Growth is expected to recover in 2020 to 3 percent, reflecting a combination of weakness in demand from regional partners and the expected rebound in agriculture and investment.

### Strong institutions
- Maintaining Uruguay’s strong track record—built on sound institutions and economic policies—will be needed to weather the worsening external environment.
- As a small open economy, Uruguay is vulnerable to changes in global market sentiment and regional spillovers.
- Elements of strong economic policy cited as helpful include:
  - diversifying exports and destinations
  - prudent debt management
  - pre-financing of external financing needs
  - lower banking sector vulnerabilities
  - ample reserves

### Debt
- Putting debt on a downward path can help contain fiscal risks.
- A reduction in the government’s overall budget deficit, which should come from reducing the elevated level of current expenditures, would help to put debt on a firm downward path.
- Utility tariffs should be adjusted in line with the cost structure and investment needs of public enterprises.

### Inflation
- Starting in mid-2018, inflation had risen above the target range, reflecting the impact of drought and peso depreciation.
- Inflation currently stands at 7.4 percent.
- Bringing inflation down closer to the middle of the target range is important to anchor inflation expectations.
- The monetary policy stance should continue to be adjusted until inflation and expectations approach the middle of the target range (5 percent).

### Reforms
- Structural policies can help to ensure incomes continue to catch up to advanced economy levels.
- Policy actions suggested include:
  - creating more government budgetary spending room to further invest in infrastructure—for example, the recent railways project
  - reforming the education sector to better equip job seekers for the technology-driven labor market
  - supporting private investment by improving the overall business environment and access to finance

*Source: Five Takeaways from Uruguay's Economic Outlook (February 22, 2019).*

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## References

- [https://www.imf.org/en/News/country-focus](https://www.imf.org/en/News/country-focus)
- [PRESS CENTER](http://presscenter.imf.org/)
- [annual economic review](https://www.imf.org/en/Publications/CR/Issues/2019/02/22/Uruguay-2018-Article-IV-Consultation-Press-Release-Staff-Report-and-Statement-by-the-46624)
- [Blog on Latin America's outlook](https://blogs.imf.org/2019/01/25/latin-america-and-the-caribbean-in-2019-a-moderate-expansion/)
- [Uruguay and the IMF](https://www.imf.org/en/Countries/URY)
- [https://www.imf.org/en/home](https://www.imf.org/en/home)

_Source: https://www.imf.org/en/news/articles/2019/02/15/na021319-five-takeaways-from-uruguay-economic-outlook_