Uruguay Economic Outlook 2021

Summary

The global economy keeps recovering in spite of the uncertain epidemiological context. World GDP growth should be 5.9% in 2021. The worsening health situation slows down economic activity in Uruguay, which will grow less than expected in 2021.

Key points

• Key points:
• GDP will only grow 2.7% mainly driven by the investment from UPM and the Central Railroad, together with a greater exports dynamism. The unemployment rate will remain high with less job creation and a discouraging effect.
• We expect tax revenues to improve due to the activity growth. However, the measures taken by the government to counteract the pandemic effects will result in a 5.4% of GDP fiscal deficit in 2021.
• The Central Bank will let the peso float while containing volatility. The exchange rate will reach 46 UYU/USD by Dec-21.
• The Monetary authority will maintain the expansionary stance of the monetary policy until the economy starts showing signs of recovery, in 3Q21. However, inflation will decelerate to 7.2% in 2021 due to the exchange rate moderation and the less consumption.
• It is important to have a sustainability agenda, seeking to attract investments that allow the current environmental situation to be further improved.

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