Uruguay GDP Slows to 1.8% as Fiscal Pressure Builds

Uruguay’s economy grew 1.8% in 2025, well below the government’s forecast and marking a sharp deceleration from the prior year that now threatens the fiscal framework underpinning President Yamandú Orsi’s first budget. The Rio Times, the Latin American financial news outlet, examines what the Uruguay GDP figures mean for the region’s highest-income economy and the fiscal adjustments likely ahead.

What Drove the Uruguay GDP Slowdown

Central Bank data published Tuesday confirmed that the economy expanded just 0.1% in the fourth quarter compared to both the prior quarter and the same period in 2024. The full-year result of 1.8% came in nearly a full percentage point below the 2.6% budgeted by the government, and below the 2.5% projected by the IMF. The BCU also revised 2024 growth upward from 3.1% to 3.3%, making the 2025 deceleration even more pronounced.

Manufacturing provided the main lift, growing 6.2% on the back of Uruguay’s expanding cellulose capacity and increased refinery activity at state oil company Ancap, which had been partly shut down for maintenance in 2024. Food processing, particularly meat and dairy, also contributed. Commerce and tourism grew 1.9%.

The drags were concentrated in construction, where road infrastructure projects contracted, and in agriculture, which fell 7.7% in the fourth quarter due to poor summer crop yields. Energy generation also declined, and imports of goods and services grew at roughly double the rate of exports.

Fiscal Consequences for Uruguay GDP Targets

Economy Minister Gabriel Oddone acknowledged before the data’s release that the government would likely revise its 2.2% growth projection for 2026 downward. Analysts surveyed by the Central Bank already expect just 1.6%, while the think tank CED projects as little as 1.2%.

The weaker trajectory tightens an already strained fiscal outlook. Uruguay’s consolidated public-sector deficit closed 2025 at 4.7% of GDP, and S&P projects the general government deficit widening to 4% this year. Oddone said he cannot rule out spending cuts and will present a full fiscal reassessment in the June budget review.

Bright Spots in an Uncertain Year

Not everything points downward. Inflation fell to 3.11% in the twelve months through February, its lowest level in seven decades and well below the Central Bank’s 4.5% target. Country risk dropped to 68 basis points, the lowest in the region, reinforcing Uruguay’s position as a stable destination for international capital.

The Mercosur-EU trade agreement, which begins provisional application on May 1, offers a medium-term opportunity for exporters, though Minister Oddone cautioned that its economic impact will be minimal this year. The progressive tariff reductions will take years to reshape trade flows, and Uruguay’s immediate growth outlook depends more on domestic demand recovery and commodity prices than on the new trade architecture.

What Investors Should Watch

Consultancy Exante noted that while the figures do not confirm a recession, they reveal that the 1.8% growth was driven almost entirely by statistical carry-over from early 2025, not by genuine momentum in the second half. The underlying economy effectively stagnated after midyear.

For a country that maintains Latin America’s highest per-capita income and an investment-grade credit rating, the challenge is not crisis but drift. Uruguay’s fiscal rule requires discipline on both the structural deficit and a debt ceiling, and delivering on those commitments with slower growth will test the Orsi administration’s willingness to make politically difficult choices in its first full year in office.

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