Uruguay’s success story continues unabated
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Uruguay is posting close to Chinese levels of GDP growth as its economy diversifies, thanks to prudent macroeconomic policies and balanced fiscal accounts that have resulted in low inflation coupled with strong gross domestic product and foreign direct investment growth.
At the close of this year, Uruguay will have experienced 24 consecutive quarters of economic growth, reaching an average annual rate over five years of 8.1%. This year, the Uruguayan economy is forecast to grow at 7.5% within a framework of prudent macroeconomic policies, balanced fiscal accounts, low inflationary levels, and a balance of payments surplus associated with increasing direct foreign investment.
The growth in these five years was led by three sectors that achieved average annual growth rates of over 10%: manufacturing, commerce, restaurants and hotels, and transport and communications. Agriculture also grew, posting average annual growth of 6.5%. This expansion was supported by sustained external demand and investment and private consumption development.
External demand for Uruguayan products has remained strong since the end of 2003, resulting in real annual export growth of 15% over the past five years. Prudent macroeconomic management, both monetary and fiscal, has enabled economic expansion to be accompanied by low inflation and reduced fiscal deficits. This has increased the economy’s capacity to endure adverse external circumstances.
The balance of payments has shown a significant surplus due to a positive balance in the current account and considerable capital inflows from foreign direct investment. Consequently, by June, the reserves of the Central Bank had increased significantly. Furthermore, an investment-oriented policy and a favourable international context have led to sustained growth in foreign direct investment over the past five years.
This has resulted in an improvement to the Uruguayan sovereign debt rating. Standard & Poor’s highlighted “Uruguay’s diminishing economic vulnerabilities” and noted that the country “remained solidly committed to sound macroeconomic policies support[ing] the upgrade.”
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