MercoPress. South Atlantic News Agency

Deutsche Bank forecasts 3% growth for 2009 in Uruguay

Deutsche Bank anticipates a significant slowdown of the Uruguayan economy for 2009, with weakening domestic demand growth and investment plus fiscal deterioration. The German bank estimates that Uruguay's GDP will expand 10.5% in 2008 but fall back to 3% next year.

Consumption which this year is growing at 14% will slowdown to 3% and investments will drop from 20% to 5%. Fiscal deficit currently at 0.6% of GDP is forecasted to increase to 0.8%, in spite of Uruguay's government's target of 0.4%. "2009 will be a difficult year" is the headline of the report which was leaked to the Montevideo press. According to the report since 75% of Uruguayan exports are based on commodities, the fall in international prices "is expected to have a negative impact in exports during 2009". The report also points out that in the last two years Uruguay benefited "from huge direct foreign investment injections, many times larger than the current account deficit. But given the global recession next year the possibilities of those direct investments are forecasted to be lesser". This year that figure is estimated in 1.5 billion US dollars falling to 500 million US dollars in 2009, points out Deutsche Bank, On the positive side, foreign debt refunding (capital and interest) in 2009 "should be modest and it is probable that Uruguay should have easy access to financing from multilateral organizations, if it were needed". Anyhow there are good chances that in 2009 "the process of rapid accumulation of international reserves will be coming to an end, al least temporarily". Regarding inflation, Deutsche Bank forecasts a "maximum peak" in the coming months but will later begin to "slide" during 2009. For 2008 the Consumer prices index is estimated to be above the Central Bank's band target of 3 to 7%. Finally the Uruguayan peso "is another victim of the major risk aversion experienced in emerging economies and has depreciated 22% so far, from the end of August". The bank estimates the exchange rate at 24.50 pesos to the US dollar by the end of 2008 and 25 Pesos by December 2009.