MercoPress. South Atlantic News Agency

Recession over in Uruguay.

The mild recovery of the Uruguayan economy in the first quarter of 2003 consolidated in the second Q and GDP expanded at an annual rate of 5,5% according to the latest release from the Uruguayan Central Bank. Growth actually was 2,2% in the first Q and increased to 3,3% in the second Q.

"These figures indicate that the recession is over", said the Central Bank in reference to the economy's contraction that began in 1999 and extended well into 2002 including a run on the banking system.

"Regional shocks particularly adverse, had a leading role in Uruguay's worst financial crisis ever and the very fragile situation".

Recovery in the first half of 2003 was based in "a change in relative prices, stabilization of the banking system, an improvement in financial indexes and a greater confidence among economic agents".

Four areas are identified as locomotives of the expansion, agriculture, commercial intermediation, freight transport and port activities, all of which contributed to a 5,1% and 7,4% increase in foreign trade in the first and second quarters. Other areas of importance include the chemical, leather and skin, textiles, mills and paper industries. A favourable foreign exchange attracted regional and overseas tourism reversing expectations.

The labour market is also showing encouraging signs with unemployment after having reached 20%, has stabilized at 16%. Public finances have improved as the economy begins to pick up and mid term budget cuts become effective.

Uruguay in the midst of the 2002 crisis signed an agreement with the IMF which contemplates a 3% GDP budget primary surplus in 2003; 3,3% in 2004 and 2005, and 4% in the medium term. The Uruguayan debt stands at 11,5 billion US dollars (75 to 85% of GDP) and its sustainability is a matter of concern unless the economy expands at a between 3,5 and 4%.