Uruguay’s Economy Rebounds with 3.7% Growth, Despite Drought and Political Uncertainty

Uruguay is expected to see a strong rebound in its economy this year, with growth projected at 3.7%, according to the International Monetary Fund (IMF). The surge in agricultural exports and balanced macroeconomic risks are driving this growth. Additionally, the IMF anticipates an increase in cellulose production by UPM and a recovery of real wages, with a further 2.9% improvement expected for 2025.

Despite facing challenges such as a historic drought in 2022 and 2023 that severely impacted agricultural production, Uruguay has seen an easing of financial conditions and robust private consumption due to updates in salaries and a reduction in the price gap of products compared to neighboring Argentina. Inflation is expected to increase in the second semester of 2024, alongside a gradual easing of rates by the Central Bank (BCU) and wage growth. However, these changes are not expected to exceed the government’s target.

The IMF emphasizes the importance of continued vigilance of monetary policy to maintain credibility and support de-dollarization efforts. These forecasts come as President Luis Lacalle Pou approaches his last year in office, as Uruguayan Constitution does not allow for back-to-back terms. The country is currently facing various scandals as politicians compete to succeed the Multicolor leader.