{
  "title": "IMF Executive Board Concludes 2021 Article IV Consultation with Uruguay",
  "publication": "IMF News, December 2, 2021",
  "sourceUrl": "https://www.imf.org/en/news/articles/2021/12/02/pr21355-uruguay-imf-executive-board-concludes-2021-article-iv-consultation",
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  "summary": "Growth is expected to reach 3.4 percent in 2021 and 3.2 in 2022.",
  "publishDate": "2021-12-02",
  "sections": [
    {
      "heading": "Economic outlook and recovery",
      "content": "- Growth is expected to reach 3.4 percent in 2021 and 3.2 in 2022.\n- After contracting by 5.9 percent in 2020, economic activity is gaining strength following a fast vaccination campaign that allowed for the reopening of contact-intensive sectors.\n- Elevated commodity prices are supporting a broad-based recovery.\n- Inflation is projected at 7.2 for end 2021 and 5.8 for end 2022.\n- Inflation expectations remain above the target range, although they have been gradually converging to the upper band of the range.\n- The pandemic amplified pre-existing structural weaknesses, including high youth unemployment, skill mismatch, and loss of schooling that added to pre-pandemic erosion of human capital."
    },
    {
      "heading": "Fiscal stance, financing, and debt outlook",
      "content": "- The fiscal balance of the non-financial public sector (NFPS), excluding ‘cincuentones’, is projected to improve from -4.5 percent of GDP in 2021 to -3.4 in 2022, while targeted fiscal support remains in place.\n- Near-term fiscal risks are limited: financing needs are moderate, liquidity buffers are adequate, and market access remains at favorable terms, reflecting investment grade status.\n- The authorities’ envisaged consolidation plan is expected to stabilize debt around 70 percent of GDP over the medium term.\n- The report notes temporary proceeds from the pension reform (cincuentones) are projected to end in 2022."
    },
    {
      "heading": "Monetary policy and financial sector",
      "content": "- Monetary policy remains accommodative and is gradually tightening in response to inflationary pressures and the economic recovery.\n- The banking sector is well capitalized and financial risks remain contained, including because the overall exposure of the financial system to sectors most affected by the pandemic is low.\n- Directors agreed that, as the economy recovers and uncertainty dissipates, support measures (accommodative monetary policy and temporary regulatory forbearance) should be phased out.\n- Monetary policy should focus on strengthening credibility by firmly steering inflation and inflation expectations towards the target as the economy recovers.\n- Durably lowering inflation is key to reducing dollarization, developing domestic capital markets, and bolstering financial intermediation and investment.\n- Efforts to enhance the Central Bank’s independence, accountability and transparency should continue."
    },
    {
      "heading": "Executive Board assessment and policy recommendations",
      "content": "- Directors commended the authorities’ effective policy response to the pandemic and Uruguay’s successful vaccination campaign.\n- Near-term policies should continue to support the recovery with targeted measures while shifting towards fiscal consolidation and debt reduction as the recovery takes hold.\n- Continued well-targeted fiscal measures to support employment and the most vulnerable were welcomed.\n- The introduction of the new fiscal rule would improve fiscal discipline; Directors encouraged authorities to consider refinements to further strengthen the fiscal framework.\n- The authorities’ resolve to reform the pension system was described as commendable for fiscal sustainability and inter-generational equity.\n- Directors encouraged structural reforms to address pandemic legacies and boost medium-term growth:\n  - Support young and low-skilled workers through active labor market policies, retraining and education reform to bolster human capital accumulation.\n  - Address labor market rigidities and accelerate reforms of state-owned enterprises to improve efficiency, reduce costs of doing business, and boost investment and growth.\n  - Invest in green energy, digitalization and infrastructure to sustain strong growth over the medium to long term."
    },
    {
      "heading": "Selected economic indicators (projections and historicals)",
      "content": "- Real GDP (percent change): 0.4 (2019); -5.9 (2020); 3.4 (2021); 3.2 (2022); 2.7 (2023)\n- Unemployment (in percent, eop): 8.9 (2019); 10.4 (2020); 10.2 (2021); 9.0 (2022); 8.5 (2023)\n- CPI inflation (in percent, end of period)): 8.8 (2019); 9.4 (2020); 7.2 (2021); 5.8 (2022); 5.0 (2023)\n- M2 (percent change of end-of-year data on one year ago): 6.3 (2019); 17.2 (2020)\n- Bank assets (in percent of GDP): 65.8 (2019); 76.9 (2020)\n- Private credit (in percent of GDP) 2/: 25.7 (2019); 27.8 (2020)\n- Revenue NFPS (percent of GDP): 28.3 (2019); 28.0 (2020); 27.4 (2021); 27.5 (2022); 27.7 (2023)\n- Revenue excluding cincuentones transactions (percent of GDP): 27.2 (2019); 27.1 (2020)\n- Primary expenditure NFPS (percent of GDP): 28.8 (2019); 30.2 (2020); 29.4 (2021); 28.6 (2022); 27.8 (2023)\n- Primary balance NFPS (percent of GDP): -0.5 (2019); -2.1 (2020); -1.8 (2021); -1.0 (2022); 0.1 (2023)\n- Overall balance NFPS (percent of GDP): -2.9 (2019); -4.7 (2020); -4.1 (2021); -3.4 (2022); -2.5 (2023)\n- Gross debt NFPS (percent of GDP): 60.5 (2019); 68.1 (2020); 67.3 (2021); 68.5 (2022); 69.7 (2023)\n- Gross debt PS (percent of GDP): 64.3 (2019); 74.9 (2020); 81.1 (2021); 82.3 (2022); 83.2 (2023)\n- Net debt NFPS (percent of GDP): 51.2 (2019); 57.8 (2020); 57.2 (2021); 58.5 (2022); 59.8 (2023)\n- PS debt net of liquid financial assets (percent of GDP): 39.9 (2019); 47.5 (2020); 52.2 (2021); 54.3 (2022); 55.9 (2023)\n- PS debt net of total financial assets (percent of GDP): 32.3 (2019); 36.8 (2020); 41.2 (2021); 43.9 (2022); 45.5 (2023)\n- Merchandise exports, fob (US$ billions): 11.7 (2019); 9.9 (2020); 13.0 (2021); 14.6 (2022); 16.0 (2023)\n- Merchandise imports, fob (US$ billions): 8.7 (2019); 7.8 (2020); 9.8 (2021); 10.9 (2022); 11.5 (2023)\n- Terms of trade (percent change): 3.8 (2019); 7.4 (2020); 3.3 (2021); 1.8 (2022); 0.2 (2023)\n- Total external debt + non-resident deposits (percent of GDP): 74.1 (2019); 88.0 (2020); 85.9 (2021); 85.2 (2022); 86.3 (2023)\n- External debt service (in percent of exports of g&s): 59.0 (2019); 75.1 (2020); 67.7 (2021); 57.7 (2022); 55.6 (2023)\n- Gross official reserves (US$ billions): 14.5 (2019); 16.2 (2020); 17.0 (2021); 17.2 (2022); 17.4 (2023)\n- In months of imports of goods and services: 13.1 (2019); 15.1 (2020); 13.7 (2021)\n- Short-term external (STE) debt (percent of reserves): 227 (2019); 250 (2020); 298 (2021); 289 (2022); 285 (2023)\n- STE debt plus banks' non-resident deposits (percent of reserves): 278 (2019); 266 (2020); 263 (2021); 254 (2022); 246 (2023)\n\nSource: IMF Communications Department press release, December 2, 2021.\n\n---\n\n\n References\n\n- Uruguay and the IMF\n- IMF Policy Advice -- A Factsheet\n- Press Releases\n- PRESS CENTER\n- http://www.IMF.org/external/np/sec/misc/qualifiers.htm\n- https://www.imf.org/en/home\n\nSource: https://www.imf.org/en/news/articles/2021/12/02/pr21355-uruguay-imf-executive-board-concludes-2021-article-iv-consultation"
    }
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    "Published: December 2, 2021",
    "Growth is expected to reach 3.4 percent in 2021 and 3.2 in 2022.",
    "After contracting by 5.9 percent in 2020, economic activity is gaining strength following a fast vaccination campaign that allowed for the reopening of contact-intensive sectors.",
    "Elevated commodity prices are supporting a broad-based recovery.",
    "Inflation is projected at 7.2 for end 2021 and 5.8 for end 2022.",
    "Inflation expectations remain above the target range, although they have been gradually converging to the upper band of the range.",
    "The pandemic amplified pre-existing structural weaknesses, including high youth unemployment, skill mismatch, and loss of schooling that added to pre-pandemic erosion of human capital.",
    "The fiscal balance of the non-financial public sector (NFPS), excluding ‘cincuentones’, is projected to improve from -4.5 percent of GDP in 2021 to -3.4 in 2022, while targeted fiscal support remains in place.",
    "Near-term fiscal risks are limited: financing needs are moderate, liquidity buffers are adequate, and market access remains at favorable terms, reflecting investment grade status.",
    "The authorities’ envisaged consolidation plan is expected to stabilize debt around 70 percent of GDP over the medium term.",
    "The report notes temporary proceeds from the pension reform (cincuentones) are projected to end in 2022.",
    "Monetary policy remains accommodative and is gradually tightening in response to inflationary pressures and the economic recovery.",
    "The banking sector is well capitalized and financial risks remain contained, including because the overall exposure of the financial system to sectors most affected by the pandemic is low.",
    "Directors agreed that, as the economy recovers and uncertainty dissipates, support measures (accommodative monetary policy and temporary regulatory forbearance) should be phased out.",
    "Monetary policy should focus on strengthening credibility by firmly steering inflation and inflation expectations towards the target as the economy recovers.",
    "Durably lowering inflation is key to reducing dollarization, developing domestic capital markets, and bolstering financial intermediation and investment.",
    "Efforts to enhance the Central Bank’s independence, accountability and transparency should continue.",
    "Directors commended the authorities’ effective policy response to the pandemic and Uruguay’s successful vaccination campaign.",
    "Near-term policies should continue to support the recovery with targeted measures while shifting towards fiscal consolidation and debt reduction as the recovery takes hold.",
    "Continued well-targeted fiscal measures to support employment and the most vulnerable were welcomed.",
    "The introduction of the new fiscal rule would improve fiscal discipline; Directors encouraged authorities to consider refinements to further strengthen the fiscal framework.",
    "The authorities’ resolve to reform the pension system was described as commendable for fiscal sustainability and inter-generational equity.",
    "Directors encouraged structural reforms to address pandemic legacies and boost medium-term growth:",
    "Real GDP (percent change): 0.4 (2019); -5.9 (2020); 3.4 (2021); 3.2 (2022); 2.7 (2023)",
    "Unemployment (in percent, eop): 8.9 (2019); 10.4 (2020); 10.2 (2021); 9.0 (2022); 8.5 (2023)",
    "CPI inflation (in percent, end of period)): 8.8 (2019); 9.4 (2020); 7.2 (2021); 5.8 (2022); 5.0 (2023)",
    "M2 (percent change of end-of-year data on one year ago): 6.3 (2019); 17.2 (2020)",
    "Bank assets (in percent of GDP): 65.8 (2019); 76.9 (2020)",
    "Private credit (in percent of GDP) 2/: 25.7 (2019); 27.8 (2020)",
    "Revenue NFPS (percent of GDP): 28.3 (2019); 28.0 (2020); 27.4 (2021); 27.5 (2022); 27.7 (2023)",
    "Revenue excluding cincuentones transactions (percent of GDP): 27.2 (2019); 27.1 (2020)",
    "Primary expenditure NFPS (percent of GDP): 28.8 (2019); 30.2 (2020); 29.4 (2021); 28.6 (2022); 27.8 (2023)",
    "Primary balance NFPS (percent of GDP): -0.5 (2019); -2.1 (2020); -1.8 (2021); -1.0 (2022); 0.1 (2023)",
    "Overall balance NFPS (percent of GDP): -2.9 (2019); -4.7 (2020); -4.1 (2021); -3.4 (2022); -2.5 (2023)",
    "Gross debt NFPS (percent of GDP): 60.5 (2019); 68.1 (2020); 67.3 (2021); 68.5 (2022); 69.7 (2023)",
    "Gross debt PS (percent of GDP): 64.3 (2019); 74.9 (2020); 81.1 (2021); 82.3 (2022); 83.2 (2023)",
    "Net debt NFPS (percent of GDP): 51.2 (2019); 57.8 (2020); 57.2 (2021); 58.5 (2022); 59.8 (2023)",
    "PS debt net of liquid financial assets (percent of GDP): 39.9 (2019); 47.5 (2020); 52.2 (2021); 54.3 (2022); 55.9 (2023)",
    "PS debt net of total financial assets (percent of GDP): 32.3 (2019); 36.8 (2020); 41.2 (2021); 43.9 (2022); 45.5 (2023)",
    "Merchandise exports, fob (US$ billions): 11.7 (2019); 9.9 (2020); 13.0 (2021); 14.6 (2022); 16.0 (2023)",
    "Merchandise imports, fob (US$ billions): 8.7 (2019); 7.8 (2020); 9.8 (2021); 10.9 (2022); 11.5 (2023)",
    "Terms of trade (percent change): 3.8 (2019); 7.4 (2020); 3.3 (2021); 1.8 (2022); 0.2 (2023)",
    "Total external debt + non-resident deposits (percent of GDP): 74.1 (2019); 88.0 (2020); 85.9 (2021); 85.2 (2022); 86.3 (2023)",
    "External debt service (in percent of exports of g&s): 59.0 (2019); 75.1 (2020); 67.7 (2021); 57.7 (2022); 55.6 (2023)",
    "Gross official reserves (US$ billions): 14.5 (2019); 16.2 (2020); 17.0 (2021); 17.2 (2022); 17.4 (2023)",
    "In months of imports of goods and services: 13.1 (2019); 15.1 (2020); 13.7 (2021)",
    "Short-term external (STE) debt (percent of reserves): 227 (2019); 250 (2020); 298 (2021); 289 (2022); 285 (2023)",
    "STE debt plus banks' non-resident deposits (percent of reserves): 278 (2019); 266 (2020); 263 (2021); 254 (2022); 246 (2023)",
    "[Uruguay and the IMF](http://www.imf.org/external/country/URY/index.htm)",
    "[IMF Policy Advice -- A Factsheet](https://www.imf.org/en/about/factsheets/imf-surveillance)",
    "[Press Releases](https://www.imf.org/en/news/searchnews)",
    "[PRESS CENTER](http://presscenter.imf.org/)",
    "[http://www.IMF.org/external/np/sec/misc/qualifiers.htm](http://www.imf.org/external/np/sec/misc/qualifiers.htm)",
    "[https://www.imf.org/en/home](https://www.imf.org/en/home)"
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