The Observer – Montevideo
The Central Bank of Uruguay (BCU) projects that the Uruguayan economy will grow by an average of 2.5% this year.and with exports as the “main driver”, boosted by the reversal of the effects of the drought on agriculture.
That estimate is 0.5 percentage points lower than the one released in the previous quarter, according to the monetary policy report released on Wednesday. The forecast is somewhat lower than the official projections included in the last report, which stand at 3%.
Meanwhile, The latest survey of expectations carried out by the BCU among local analysts predicts growth of 3.3% for this year, according to the median of responses.
Second quarter leading indicators
In the first quarter, the Uruguayan economy grew by 0.9% seasonally adjusted and 0.6% year-on-year.The BCU GDP is expected to expand seasonally in the second quarter. Official data for that period will not be known until mid-September.
The report explains that consumption indicators “showed relative stability,” with car sales remaining at “high levels.”
For its part, the Consumer Confidence Indicator (ICC) remained stable in June, and was at levels of moderate optimism, with a decrease in the intention to purchase durable goods, which was offset by improvements in the “personal situation” and “country’s economic situation” sub-indexes.
For its part, Outbound tourism experienced “a sharp slowdown” in the second quarter and in seasonally adjusted terms, particularly with Argentina, the report says.
According to the report, Investment indicators showed “mixed signals.” There was growth in truck sales, while investments by the non-financial public sector “maintained high dynamism.”
In contrast, imports of capital goods would show a slight fall in the seasonally adjusted comparison with the previous quarter,” says the BCU. For its part, exports of goods in constant terms “would deepen growth in the second quarter, given the intensification of exports such as soybeans, it explains
He also noted that the manufacturing industry showed signs of recovery, both in the global physical volume index and at the industrial core level.
Inflation and interest rate
Regarding inflation, the BCU confirmed that would remain within the target range – between 3% and 6%– over the entire monetary policy horizon, and would converge to the center of the range in June 2026.
“This dynamic would occur within the framework of inflation expectations that continue to react favorably to the contractionary phase of monetary policy. Other macroeconomic factors, such as the persistence of a negative TCR gap that is closing at a relatively slow pace and the presence of a GDP gap in negative territory throughout the entire horizon, would also contribute to this evolution of inflation,” says the report.
Inflation in the 12 months to July stood at 5.45%, accelerating again for the third consecutive month. However, it remains within the target set by the authorities, a range in which it has remained for 14 consecutive months. Meanwhile, The monetary policy interest rate would remain at around 8.5% during the second half of the year and part of 2025.
Real exchange rate
The monetary policy report also notes that in the second quarter Uruguay’s real exchange rate would have been 10.4% below the value suggested by its fundamentals, according to the models used by the bank.
