Uruguay flag Uruguay: Economic and Political Overview

The economic context of Uruguay

Economic Indicators

For the latest updates on the key economic responses from governments to address the economic impact of the COVID-19 pandemic, please consult the IMF's policy tracking platform Policy Responses to COVID-19.

The Uruguayan economy is significantly dependent on its neighbours, Brazil and Argentina. In 2022, GDP increased by an estimated 5.3%, mainly due to an increase in tourism and in agricultural production.The economy is expected to continue growing in the coming years, albeit at a slower pace, with the IMF predicting growth of 3.6% for 2023 and 2.7% for 2024.

In 2022, inflation remained above the target of 7%, reaching an estimated 9.1%. However, that rate should decrease in 2023 and 2024, to 7.8% and 6.4%, respectively. Public debt decreased to 61.2% of GDP in 2022, but it's expected to increase to 62.6% in 2023 and 63.9% in 2024. Moreover, the fiscal deficit slightly increased to 2.7% in 2022, but it should slightly fluctuate in the coming years, reaching 2% in 2023 and 2.3% in 2024. Furthermore, the current account went into an estimated 1.2% deficit in 2022, and that rate is expected to increase to 1.9% in 2023 and 2% in 2024. The economy has diversified in the past few years with the development of the industry sector (particularly the paper industry), as well as commerce and services. The government's fiscal policies are focused on restoring business profitability as a way to encourage investment and foster economic growth. Its priorities include reducing the large fiscal deficit  through a programme involving austerity and rationalisation of public spending (particularly through a better management of state-owned companies), while maintaining benefits for the most vulnerable sectors. Other key elements are the commitment to open trade, the reform of labour relations, and regulatory and management changes in public enterprises. Although the pandemic has impacted the Uruguayan economy, it had relatively little impact when compared to other countries in the region. Still, Uruguay's fiscal measures implemented to mitigate the impacts of the pandemic have been effective in boosting economic activity, which has been gradually recovering. Looking ahead, recovery should continue, albeit at a slower pace, due to the fading impact of a low base effect, tighter monetary policy and heightened inflationary pressures.

Uruguay has one of the highest levels of GDP per capita in South America and a developing middle class. The country has had strong political and social stability for years, backed by a consolidated democracy and strong legal security, which makes it attractive to investors. Furthermore, the population living below the poverty line has decreased significantly in the past decade, from 40% in 2004 to 6.2% in 2016, due to a solid social contract and economic openness. However, there is still room for improvement in terms of financial transparency. The unemployment rate decreased to 7.9% in 2022, as the country recovered from the impacts of the pandemic, and it should remain stable in 2023 and 2024.

 
Main Indicators 20222023 (E)2024 (E)2025 (E)2026 (E)
GDP (billions USD) 71.1876.2481.0785.1389.15
GDP (Constant Prices, Annual % Change) 4.91.03.32.92.6
GDP per Capita (USD) 20,02221,37822,65923,72124,766
General Government Balance (in % of GDP) -2.0-2.9-2.5-2.3-2.1
General Government Gross Debt (in % of GDP) 59.361.661.461.761.6
Inflation Rate (%) n/a6.15.95.55.2
Unemployment Rate (% of the Labour Force) 7.98.18.08.08.0
Current Account (billions USD) -2.50-2.85-2.71-2.51-2.31
Current Account (in % of GDP) -3.5-3.7-3.3-2.9-2.6

Source: IMF – World Economic Outlook Database, October 2021

Main Sectors of Industry

Uruguay’s natural resources are very limited, mainly due to country's size. There is a significant mining industry in the country, which mainly revolves around basalt, dolomite, limestone, quartz, granite and marble. There is only one gold-producing mine in Uruguay, and the country is a major producer of cement and semi-precious stones, particularly agate and amethyst. Even though only around 10% of the land is arable, agriculture is the largest export sector in Uruguay. It accounts for 6.9% of the GDP and employs 8.4% of the active population. Uruguay has rich agricultural land and almost 90% of it is devoted to livestock breeding (cattle, sheep, horses and pigs). Rice is the main crop, followed by wheat, maize, sugar cane, soybeans, and tobacco. Vegetable and fruit farming are also present throughout the country, as well as a prominent wine industry along the coast of the Rio de la Plata. Overall, 2022 was a good year for the sector, which had a triple success: good prices, good yields and good climatic conditions.

The industrial sector contributes to 18.9% of the country's GDP and employs 18.8% of the active population. Agriculture and animal food processing account for half of the industrial activity. Other manufacturing activities include beverages (especially wine), textiles, construction materials, chemicals, oil and coal. Additionally, Uruguay has recently invested heavily in the paper industry, which is expanding. Industrial activity in Uruguay registered was satble in 2022, registering the stronger growth in the construction industry.

The services sector contributes to 62% of the GDP and employs 72.8% of the active population, mainly in finance and tourism. Particularly, the region around Punta del Este attracts a large number of visitors, which has driven the rise in building, leading to a construction boom in the area in recent years. Although the services sector was hit the hardest during the pandemic, the sector registered an overall growth in 2022, with the recovery being mainly driven by commerce, restaurants, hotels, and transport.

 
Breakdown of Economic Activity By Sector Agriculture Industry Services
Employment By Sector (in % of Total Employment) 8.4 18.9 72.6
Value Added (in % of GDP) 7.3 17.6 63.2
Value Added (Annual % Change) -2.9 1.8 6.4

Source: World Bank, Latest Available Data. Because of rounding, the sum of the percentages may be smaller/greater than 100%.

 

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Indicator of Economic Freedom

Definition:

The Economic freedom index measure ten components of economic freedom, grouped into four broad categories or pillars of economic freedom: Rule of Law (property rights, freedom from corruption); Limited Government (fiscal freedom, government spending); Regulatory Efficiency (business freedom, labour freedom, monetary freedom); and Open Markets (trade freedom, investment freedom, financial freedom). Each of the freedoms within these four broad categories is individually scored on a scale of 0 to 100. A country’s overall economic freedom score is a simple average of its scores on the 10 individual freedoms.}}

Score:
69,3/100
World Rank:
44
Regional Rank:
4

Economic freedom in the world (interactive map)
Source: Index of Economic Freedom, Heritage Foundation

 
 

Country Risk

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Latest Update: December 2023

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