BBVA Research: Uruguay Economic Outlook 2023

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After the pandemic and the end of the construction of the third pulp mill, the Uruguayan economy faces a couple of years of moderate growth. However, in the long term, recent improvements in the sovereign risk rating reinforce the institutional quality and strength of the country’s macroeconomic fundamentals.

Key points

  • After growing 3.4% in 2022, the global economy will expand by 2.9% in 2023, driven by still robust demand, lower commodity prices and normalization of bottlenecks.
  • In 2023, we expect the Uruguayan economy to grow by around 2%, with private consumption playing a leading role due to the recovery of real wages. By 2024, we foresee a slight rebound in activity to 2.3% once the adverse effects of the drought are overcome.
  • We estimate that the consolidated fiscal deficit will be 3.1% of GDP in 2023 and 2.9% in 2024, given the recent poor performance in real terms of the public accounts and the performance of public enterprises.
  • Prices show slow deceleration, and inflation will reach 7.5% this year and 6.2% next year. The BCU will resume its interest rate cut, ending the year at 10.25%.
  • In line with most regional currencies, the peso has appreciated over the last 12 months. We expect a slight depreciation for the rest of the year, and in December, the UYU/USD parity will reach 39.7.

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