Uruguay Economic Forecast

After contracting in annual terms in Q4, available data indicates that the economy rebounded in the first quarter of the year. Industrial output expanded at a faster rate in Q1 relative to its Q4 average. Moreover, lower inflation during the period likely buoyed private spending. Moving forward, April’s rate cut is set to buttress activity. Meanwhile, on 26 April, S&P upgraded the country’s rating to ‘BBB+’ from ‘BBB’, citing the likely approval of the social security reform as a key contributing factor to healthier public finances ahead. Later, on 27 April, Congress approved the reform, which will push the retirement age from 60 to 65 from 2027 and at a gradual rate. The reform spurred a general strike in late April, and the opposition and labor unions are considering collecting signatures in order to force a plebiscite to repeal the law.

Inflation came in at 7.6% in April, up from March’s 7.3% and marking the first increase since September 2022. The uptick was chiefly driven by faster price increases for food and non-alcoholic beverages. Inflation is seen close to current levels in the coming quarters. The pace of monetary easing is a key factor to watch.