Uruguay’s economy grew by 3.1% in 2024 following a drought, with GDP increasing by 3.5% in Q4. However, growth is expected to slow to 2-2.5% in 2025, as consumption and investment are critical factors. Policy decisions will influence future economic performance.
In 2024, Uruguay’s economy exhibited a growth of 3.1% as it recovered from a severe drought that affected agricultural output in the preceding year. This data, released by the Central Bank of Uruguay (BCU), indicates a positive trend; however, economists anticipate that growth will revert to slower historical rates in 2025.
The increase in GDP reached 3.5% year-on-year in the last quarter of 2024, with a seasonally adjusted increase of 0.3% compared to the previous quarter. The growth was primarily driven by improved agricultural yields, robust hydropower production, heightened trade activity, and enhanced pulp output, although a decline in construction tempered these gains due to the completion of a major railway project.
Despite the optimistic figures, analysts suggest that they signify a recovery rather than an upward surge. José Antonio Licandro, an economist, remarked, “These are good numbers, but Uruguay is not taking off—it’s recovering.” He indicated that 2025 would experience solid growth consistent with traditional modest rates.
Key sectors contributing to rapid growth included agriculture, energy, and manufacturing, with energy soaring by 19.6% and agriculture by 11.3%. Additionally, external demand, particularly an 8.3% increase in exports, played a significant role in fueling this growth.
Looking to 2025, forecasters predict a slowdown in growth rates between 2% and 2.5%. Economist Luciano Magnífico commented, “Without one-off effects like the drought rebound, we expect a more moderate pace,” revealing concerns regarding household consumption and investment declines.
Marcelo Sibille from KPMG noted that household consumption saw only modest growth, and fixed investment fell overall, besides a slight recovery in the latter half of the year. Revised data from the BCU indicated changes in GDP growth for previous years, with 2023 adjusted from 0.4% to 0.7% and 2022 down from 4.7% to 4.5%.
Moving forward, domestic consumption and investment are anticipated to be pivotal for growth, particularly as external conditions may deteriorate. Sibille emphasized the necessity of policy measures to foster investment and productivity, stating, “The challenge now is to create conditions for faster income growth.”
Upcoming policy decisions regarding interest rates, wage negotiations, and the national budget in October are poised to influence Uruguay’s economic direction significantly. With an estimated per capita GDP of $23,500 and a total GDP of approximately $81 billion, Uruguay maintains a steady performance in the regional context, although the question of transcending its historical growth limitations remains pertinent.
Uruguay’s economic landscape has shown a promising recovery in 2024, yet projections indicate a slowdown for 2025, reverting to customary growth patterns. Key sectors such as agriculture and energy have thrived, but challenges in household consumption and investment persist. Addressing these concerns through effective policy measures will be vital for sustaining growth and enhancing productivity in the future.
Original Source: en.mercopress.com
