Uruguay’s economy grew by 3.1% in 2024, recovering from a drought, yet growth is expected to slow to 2-2.5% in 2025. Major contributors included strong agricultural yields and external demand, while concerns about household consumption and investment persist. Effective policies will be crucial for future economic growth.
In 2024, Uruguay’s economy rebounded with a notable growth of 3.1% as it recovered from a severe drought experienced the prior year, according to the Central Bank of Uruguay’s national accounts data. Economists, however, caution that the anticipated growth for 2025 will likely revert to the historically slower pace typical of the country.
During the last quarter of 2024, the Gross Domestic Product (GDP) demonstrated a year-on-year increase of 3.5%, along with a 0.3% rise in seasonally adjusted terms from the previous quarter. This recovery was bolstered by improved agricultural yields, robust hydropower generation, increased trade engagement, and a rise in pulp production. Notably, these gains faced adversity due to a decline in the construction sector, primarily as a result of completing a significant railway project.
Economist José Antonio Licandro remarked on the encouraging figures, stating, “These are good numbers, but Uruguay is not taking off—it’s recovering.” He suggested that growth in 2025 would be “solid, but at our own pace,” emphasizing Uruguay’s historical patterns of modest expansion.
The sectors of agriculture, energy, and manufacturing performed strongly, with energy growing by 19.6% and agriculture by 11.3%. Additionally, an 8.3% increase in exports significantly fueled demand-driven growth.
Looking toward 2025, projections indicate a slowdown in growth, expected to fall between 2% and 2.5%. Luciano Magnífico from Exante indicated that the absence of one-off factors like the drought rebound would lead to a more moderate growth pace.
Concerns have arisen regarding subdued household consumption and declining investment. Marcelo Sibille of KPMG pointed out that household consumption only grew slightly in 2024, with fixed investment decreasing, although there was a minor recovery in the latter part of the year.
According to the updated data from the BCU, adjustments have been made to previous years’ GDP figures: 2023’s growth was revised from 0.4% to 0.7%, while 2022 was adjusted down from 4.7% to 4.5%.
For 2025, it is anticipated that domestic consumption and investment will be more critical drivers of economic growth, particularly as external conditions may not be as favorable. Sibille noted, “The challenge now is to create conditions for faster income growth,” signaling the importance of policies that enhance investment and productivity.
Economists emphasized the significance of forthcoming policy decisions regarding interest rates, wage negotiations, and the October national budget, which will significantly influence Uruguay’s economic outlook. With an estimated per capita GDP of $23,500 and a total GDP of approximately $81 billion, Uruguay maintains a steady economic performance by regional standards. Nevertheless, as El País highlights, the pressing question remains whether the nation can transcend its historically modest growth ceiling.
In conclusion, Uruguay’s economy showcased a recovery in 2024 with 3.1% growth, but economists foresee a moderation in 2025, potentially returning to more traditional growth rates between 2% and 2.5%. Key drivers of this growth included strong performance in agriculture and energy sectors, alongside external demand. However, challenges in household consumption and investment persist, calling for effective policy measures to stimulate economic momentum and address the historically low growth ceiling.
Original Source: en.mercopress.com
