Uruguay: Staff Concluding Statement of the 2026 Article IV Mission
IMF News, September 24, 2026
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- Published: September 24, 2026
Recent Developments
- Mission visit: Montevideo during September 14-24 for the 2026 Article IV consultation; mission led by Mr. Raphael Espinoza.
- Growth and output:
- Growth moderated; averaged 1.8 percent in 2025 due to a local drought affecting agricultural production since Q3:2025.
- Growth supported by strong private consumption driven by real wage gains amid declining inflation and peso appreciation.
- External sector and reserves:
- Current account deficit was 0.5 percent of GDP in 2025.
- Goods trade balance deteriorated in H1:2026.
- International reserves: 11¼ months of imports at end-August 2026.
- Labor market and prices:
- Unemployment at historically low levels and a decrease in informality.
- Inflation declined steadily throughout 2025 and fell below the 4.5 percent inflation target of the BCU; inflation was 4.6 percent in August (year not specified in source).
- Central bank initiated a monetary easing cycle in July 2025.
- Inflation expectations remained well anchored around the target.
- Fiscal position and market access:
- Deficit of the central government including social security (CG-BPS) was 3.7 percent of GDP in 2025 (4.1 percent of GDP excluding one-off pension revenues), up from 3.1 percent in 2024.
- Uruguay retains favorable market access, investment-grade credit ratings, and sovereign spreads that are the lowest in the region and near historical lows.
- Policy orientation:
- Government in its second year emphasizes macroeconomic stability and inclusive growth.
- Updated 2026 budget preserves fiscal consolidation objectives of the five-year budget and advances reforms to boost growth, jobs, and reduce poverty.
Outlook and Risks
- Growth projections:
- 2026 growth projected at 1.3 percent due to the effect of last year’s drought on agricultural production.
- Growth projected to reach 2.4 percent in 2027 as the output gap narrows.
- Inflation and policy rate:
- Inflation projected to stabilize at the 4½ percent target at end-2026 and in 2027.
- Accompanied by a gradual increase of the policy rate to a neutral level.
- Current account:
- Projected current account deficit: 0.9 percent of GDP in 2026.
- Risk assessment:
- Macroeconomic risks tilted to the downside.
- Downside risks: tighter global financial conditions, oil price shocks, weather-related shocks including El Niño.
- Mitigating factors: high share of renewable electricity production; ample liquidity buffers and favorable borrowing conditions; systemic risks contained due to low credit-to-GDP ratio, liquid and well-capitalized banks, and limited sovereign-banking nexus.
- Upside risks: high agricultural revenues, opportunities from the EU-Mercosur agreement, and strong effects of reforms.
Macroeconomic policies — Overview
- Policy mix should focus on:
- (i) preserving structural fiscal consolidation objectives;
- (ii) maintaining a reactive monetary policy to continue anchoring inflation expectations; and
- (iii) implementing reforms to strengthen policy transmission channels and to boost potential growth.
Fiscal Policy
- Fiscal outturns and projections:
- With fiscal outturns through July 2026 broadly in line with plans, the deficit of the CG-BPS is projected at 4.1 percent of GDP (unchanged from the 2025 deficit when excluding one-off pension revenues).
- In the context of a negative output gap of 1½ percent of GDP in 2026, authorities’ decision to maintain medium-term budget objectives is commended.
- Planned adjustment expected to improve the primary balance of the CG–BPS from -1.6 percent of GDP in 2026 to -0.1 percent of GDP in 2029.
- Measures underpinning adjustment:
- Strengthen tax administration.
- Implementation of the global minimum tax.
- Rationalization of tax expenditures.
- IFIs technical assistance supports these measures; publishing detailed information on estimation of their yields would improve credibility.
- Debt dynamics and risks:
- Under the baseline, the NFPS debt-to-GDP ratio projected to remain broadly stable in the medium term.
- Risks to adjustment: macroeconomic and international tax environment, implementation delays, and spending pressures.
- Further effort to bring CG-BPS primary balance to ½ percent of GDP by 2029 would help put debt-to-GDP on a steady downward path.
- Policy options and recommendations:
- Reduce tax expenditures.
- Moderate the wage bill.
- Improve public spending efficiency.
- Undertake spending reviews in large outlay areas such as health and education and strengthen use of performance information in budget decision-making.
- Fiscal framework and debt management:
- Recent fiscal framework reforms welcome; operationalization of correction mechanism (decree published in June 2026) will strengthen credibility and debt sustainability.
- Strong debt management, including progressive de-dollarization, mitigates rollover, interest rate, and exchange rate risks.
- Uruguay pioneering in climate finance, widening investor base and securing innovative multilateral financing.
- BPS’s actuarial analysis: proposed early retirement reform would have negligible effects on sustainability; proposed change in Solidarity Supplement indexation would reduce fiscal risks.
- Authorities have a roadmap to improve fiscal transparency, supported by IMF technical assistance.
Monetary Policy
- Assessment of policy conduct:
- Monetary policy has been appropriately reactive and predictable and has anchored inflation expectations.
- Monetary stance has been suitably accommodative so far.
- Central bank should maintain reactive decision-making and be ready to adjust the policy rate as it monitors inflation-relevant factors.
- Institutional and operational recommendations:
- Strengthen de jure central bank independence and BCU financial autonomy.
- BCU Board members should be appointed for fixed terms not overlapping with the electoral cycle to align with international best practices.
- Reviews of the IT framework and the inflation target should be regular, pre-announced, well-communicated, periodic but infrequent, analytically rigorous, and highly transparent; changes only when structural developments justify them and with a high threshold for change.
- Exchange rate and FX policy:
- Exchange rate should continue to act as a shock absorber; FX interventions limited to disorderly market conditions.
- De-dollarization and financial deepening:
- Ongoing efforts to reduce financial dollarization, stimulate credit in pesos, and deepen domestic capital markets are welcome.
- BCU measures: lowering peso reserve requirements, reducing remuneration of dollar reserve requirements, and enhancing competition in peso markets.
- Low and stable inflation remains the most important driver of de-dollarization.
- De-dollarization may help reduce the size of the BCU balance sheet and lower its quasi-fiscal cost over time.
- New investment vehicles, fintech regulatory sandboxes, and Open Finance will contribute to financial market development.
Financial Sector
- Banking system soundness:
- Banks are well capitalized, highly liquid, and profitable.
- Capital ratios are almost twice the minimum regulatory requirement.
- Credit in pesos is growing at about 9 percent in real terms y/y (August 2026).
- Non-performing loans remain low with adequate loan loss provisions.
- Profitability declined in 2025 mainly due to a weaker dollar.
- Dollarization and risk mitigation:
- Dollarization heightens FX credit and liquidity risks, but mitigants include low household indebtedness, mostly hedged and liquid corporates, and ample banks and central bank FX liquidity.
- Regulatory and supervisory developments:
- Expansion of the BCU regulatory perimeter and regulation of virtual asset service providers to contribute to financial stability and integrity.
- Implementation of Basel III through revised capital requirements, including differentiated treatment of FX lending, and a new Pillar 2 supervisory framework.
- Enhanced lender-of-last-resort framework to bolster crisis-management capacity.
- Amendments to the AML/CFT framework to strengthen Uruguay’s AML/CFT regime.
Structural Issues
- Growth performance and goal:
- Since 2016, growth has averaged 1.2 percent, insufficient to converge to advanced economies’ income levels.
- Government advancing an agenda of inclusive growth, building on reform momentum.
- Labor market and human capital:
- Strengthen labor supply and labor market inclusion to support growth amid demographic pressures.
- Integral Employment Law and Uruguay Impulsa are steps to improve employment prospects for vulnerable groups, addressing weak educational outcomes and high hiring costs with training and targeted subsidies.
- Additional measures: close the gender gap in labor force participation, attract skilled workers, and recognize qualifications.
- Coordinated efforts and additional budget to combat crime to enhance labor market participation and business climate.
- Collective bargaining and productivity:
- 2025-26 government guidelines for collective bargaining boosted lower-paid workers’ salaries while being consistent with the inflation target and reducing indexation.
- Authorities should monitor employment outcomes and consider accounting for productivity differences across firms.
- Competitiveness, SOEs, and investment:
- Draft Competitiveness Law aims to facilitate trade, strengthen competition, reduce red tape, and attract investment; incentives to R&D and Uruguay Innova agency are welcome.
- Continued reforms in state-owned enterprises and state-owned banks recommended: align wages with productivity, improve resource allocation, and cost-reflective pricing.
- Government’s irrigation agenda could expand agricultural production and boost climate resilience.
- Education:
- Secondary education lags advanced-economy benchmarks in completion rates and mathematics performance.
- Updated budget provides additional resources, expands scholarships and support for disadvantaged households.
- Ongoing curriculum reforms emphasize competency-based learning and alignment with labor market needs; Ceibal’s AI literacy framework should further strengthen skills development.
Staff thanks the Uruguayan authorities for their hospitality, constructive dialogue, and collaboration during the Article IV mission to Montevideo.