World Bank Flags Risks as Uruguay’s Economy Shifts to Lower Growth Path

The World Bank, IMF, and leading analysts have all trimmed Uruguay’s economic growth forecasts for 2025, signaling a return to the country’s historical pace after a brief rebound.

Uruguay’s Central Bank data shows the economy expanded by 3.1% in 2024, recovering from a severe drought that hit agriculture and energy production. This recovery lifted real household incomes by 3% and pushed poverty down to 6%.

However, experts agree that this bounce reflects a one-off correction, not a new growth trend. For 2025, most forecasts now converge around 2.3% to 2.7% GDP growth, down from the 3% to 3.4% projections made earlier in the year.

The World Bank and several private banks cite fading external demand, lower global commodity prices, and the end of major infrastructure projects as key reasons for this slowdown.

The IMF expects Uruguay’s growth to reach 3% in 2025 but notes that downside risks remain, especially if global conditions deteriorate or if climate events strike again.

Export sectors, especially cellulose and tourism, will remain central to Uruguay’s growth. Stronger demand from Argentina and Brazil could help, but these neighbors face their own uncertainties.

Uruguay Faces Economic Slowdown

Uruguay’s exports grew by 8.3% in 2024, but analysts expect a 10% drop in goods exports in 2025 as commodity prices soften. The country’s per capita GDP stands at around $23,500, with total GDP near $81 billion, making it one of South America’s highest-income economies.

Domestic consumption and investment will need to pick up slack as external drivers weaken. However, household consumption grew only modestly in 2024, and fixed investment fell despite a late-year rebound.

Inflation should remain within the Central Bank’s 3% to 6% target, with forecasts around 5% for 2025. The unemployment rate, at 8.4%, is expected to stay stable.

Fiscal policy remains under scrutiny. The government’s deficit sits near 3% of GDP, and public debt exceeds 60%. A recent pension reform aims to bolster fiscal sustainability, but savings will take years to materialize.

Uruguay’s dollarization level remains high, exposing it to currency risks if the U.S. dollar strengthens further. Uruguay’s business climate stands out for its stability and legal security, but the real story is a country returning to its steady, modest growth path.

Investors and policymakers now face the challenge of unlocking faster income growth through higher productivity and renewed investment, as the easy gains from recovery fade.

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