Drought-hit Uruguay to grow 1% in 2023, according to a major bank

By Juan Pablo Álvarez

Towards the end of April, the Economic Commission for Latin America and the Caribbean (ECLAC) published a report on projected growth for Latin American countries, in which it estimated that Uruguay’s Gross Domestic Product (GDP) would expand by 2% in 2023.

Those figures sound optimistic today.

A month after that ECLAC document, a report by the Brazilian giant Itaú – Unibanco, published by the Uruguayan newspaper El País, forecasts that the GDP will grow 1% annually.

In addition, the financial entity predicted inflation of 6.5% for Uruguay in 2023.

Last year it was 8.29%.

“Downside risks are now more balanced than the previous scenario, as the main activity indicators expanded in the first quarter and at the beginning of the second quarter.”

“Even so, a severe drought and a weaker Argentine economy are holding back the expansion of activity,” anticipates Itaú – Unibanco.

Nevertheless, this report projects that the Uruguayan economy will grow by 3.6% throughout 2024.

“While inflationary pressures have been high during April, we believe they are transitory and will likely ease in the second half of 2023 as the drought subsides.”

“A strong currency and weaker activity are also likely to help inflation to decelerate,” the report explained, as recounted by El País.

On the other hand, Itaú sees “risks (higher deficit) to our nominal fiscal balance of -2.6% of GDP by 2023, in line with the Ministry of Economy’s target.”

“Softer activity and the current fiscal deficit dynamics (-3.7% of GDP in 12 months to Q1) will require tighter spending control in the remainder of the year to reach the target.”

By 2024, the bank estimates that the deficit will decrease to 2.3% of GDP.

In addition, the Brazilian bank expects the dollar to close in 2023 at US$41.50 in Uruguay, and by the end of 2024, it will be quoted at US$43.10.

With information from Bloomberg

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