IMF Executive Board Concludes 2024 Article IV Consultation with Uruguay Washington, DC – The Executive Board of the International Monetary Fund (IMF) concluded the 2024 Article IV consultation with Uruguay. Overview Uruguay has weathered the challenges of the COVID-19 pandemic and the global economic slowdown relatively well. The economy grew by 5.4% in 2022, and is projected to grow by 3.5% in 2023 and 3.3% in 2024. Inflation has declined from a peak of 9.4% in July 2022 to 8.1% in January 2023, but remains above the target range of 3-6%. The current account deficit narrowed to 1.9% of GDP in 2022, supported by strong export performance. Fiscal Policy The fiscal deficit reached 5.4% of GDP in 2022, mainly due to spending increases related to the pandemic and the war in Ukraine. The deficit is projected to narrow to 4.8% of GDP in 2023 and 4.4% of GDP in 2024. The authorities are committed to fiscal consolidation, and have proposed a spending review and tax reforms to reduce the deficit over the medium term. Monetary Policy The Central Bank of Uruguay has been raising interest rates since July 2021 to combat inflation. The policy rate has increased from 4.5% to 11.5% during this period. The IMF staff supports the central bank’s focus on bringing inflation back to the target range. Structural Reforms The government is implementing a number of structural reforms to boost economic growth and productivity. These include measures to improve the business environment, promote innovation, and reduce informality. The IMF staff welcomes these reforms and encourages the authorities to continue along this path. Outlook The outlook for Uruguay is positive. Economic growth is expected to continue in the coming years, and inflation is projected to moderate. However, the economy faces a number of risks, including global economic uncertainty, geopolitical tensions, and potential fiscal slippages. Executive Board Assessment Executive Directors commended the authorities’ management of the COVID-19 pandemic and the global economic slowdown. They noted that the economy has performed well, but that challenges remain, including inflation and the need for fiscal consolidation. Directors welcomed the authorities’ commitment to fiscal discipline and their plans for structural reforms. They encouraged the authorities to implement these reforms in a timely manner to support sustained economic growth and improve living standards. Directors also supported the central bank’s focus on reducing inflation. They noted that further monetary tightening may be necessary to bring inflation back to the target range. Overall, Directors agreed that Uruguay’s economic outlook is positive, but that it is important to address the risks facing the economy and to continue implementing policies that promote sustainable and inclusive growth.IMF Executive Board Concludes 2024 Article IV Consultation with Uruguay Washington, DC – The Executive Board of the International Monetary Fund (IMF) today concluded the 2024 Article IV consultation with Uruguay. Key Findings * Uruguay’s economy has shown resilience despite global headwinds, with GDP growth projected at 5.5% in 2023 and 3.9% in 2024. * Inflation has moderated but remains elevated, reflecting imported inflation and strong domestic demand. * Strong macroeconomic fundamentals, including low public debt and a sound financial system, have supported economic stability. * However, the external environment remains challenging, with risks emanating from global economic slowdown, commodity price volatility, and geopolitical tensions. Executive Board Assessment Executive Directors commended the Uruguayan authorities for their prudent macroeconomic policies and effective COVID-19 response. They noted that the ongoing economic recovery is being supported by strong private consumption and investment. Directors emphasized the importance of addressing inflation, while balancing the need to support growth. They welcomed the Central Bank’s commitment to monetary tightening and encouraged further policy adjustments if necessary. Directors also highlighted the need to strengthen fiscal sustainability over the medium term. They recommended gradually reducing the fiscal deficit, while protecting social spending and public investment. Other Issues * Directors welcomed the progress made in reducing poverty and inequality, but noted that further efforts were needed. * They encouraged the authorities to continue their structural reform agenda, including in the areas of labor market flexibility, education, and judicial efficiency. * Directors also stressed the importance of addressing climate change and promoting sustainable development.