MercoPress. South Atlantic News Agency

Inflation in Uruguay.

Consumer prices in Uruguay increased 0,95% during April bringing the first quarter total to 5,52% and 27,68% for the last twelve months, according to the latest release from the Statistics Office.

Clothing, footwear and food were among the components of the index that experienced the greatest increase during April, while transport, schooling and housing were at the opposite end plus energy prices that actually dropped. Consumer prices in April 2002 reached 1,61%.

The inflation for 2003 according to the letter of intent signed by Uruguayan authorities with the IMF is in the range of 25/30%, however that estimate has been lowered to 20% given the current strict monetary policy and the forecasted decrease in fuel prices.

Local analysts believe Uruguayan officials might be forced to increase public utility rates to help the Treasury keep to the budget primary surplus target of 3,2%, one of the conditions for the substantial financial support the country is receiving after experiencing last year a massive run on the banks equivalent to 20% of GDP, as a direct consequence of the melting of the Argentine economy during the first two quarters of 2002 when Argentine depositors came looking for their money.

Uruguay's lowest inflation in recorded history was 2001 with 3,59%, after having reached 5,05% in 2000. But last year as a consequence of the financial crisis that forced a banking holiday of several days last August and the free flotation of the peso, the consumer price index climbed to 26%.

Uruguay's economy is forecasted to keep contracting in 2003, possibly 7%, but in the last quarter of the year a strong rebound is predicted.

Although the country is steadily recovering international reserves that now stand above a billion US dollars, unemployment still remains very high and during the first quarter was equivalent to 18,6% of the active economic population, according to the Statistics Office complementary information.