IMF Staff Country Reports

This 2023 Article IV Consultation discusses that Uruguay showed strong resilience during the coronavirus disease 2019 pandemic, owing to its high institutional quality, strong governance, and the authorities’ policy responses. Scarring effects in real activity and the labor market were mitigated somewhat by the authorities’ well-targeted responses. The authorities’ strong record of accomplishment of implementing sound macroeconomic policies in a challenging environment has improved the country’s resilience to shocks. The economy is expected to decelerate in 2023. Despite external headwinds, tighter financial conditions, and the impact of the drought, growth would be supported by a strong tourism season, increased cellulose production and exports, and robust private consumption as real wages recover. Fiscal policy plans are appropriate for 2023. After the effect of the drought abates, additional fiscal efforts would be needed to put debt on a firm downward path and rebuild policy space. The tight monetary policy stance is appropriate and should be maintained until inflation and inflation expectations have converged to the target range in a sustained manner.