MercoPress. South Atlantic News Agency

Uruguay estimates 3% economic growth next year

Economy minister Alvaro Garcia opened the forum

Uruguay's economic team announced on Wednesday the government's estimates for the next twelve months admitting that the world recession will reach the country but growth rate in 2009 will be in the range of 3%, “above the average of the last fifty years”.

"The world is in recession and the crisis will reach us all, but will have a lesser impact on Uruguay", said Deputy Economy minister Andres Masoller during the official presentation at a business forum of the coming twelve months estimates. Masoller said exports next year will drop in the range of 7 to 10%, while tourism will suffer a significant contraction and investments will decelerate, as a consequence of the global crunch extending from the financial sector to the real economy. However Masoller anticipated that "things will improve during the second half of next year" and described the current financial crisis as "transitory". He said Uruguayan exports will rebound because there's a strong demand for food, "our main sales overseas" from counties such as China, India and Brazil. Regarding tourism Masoller said "we would have wished that the coming season would be more promising, but we anticipate a sufficient number of tourists, maybe more prudent about their expenditures, but they will come". Economy minister Alvaro García who opened the forum said that contrary to other countries and in spite of the "serious global situation" Uruguay analyzed the situation and decided the Uruguayan financial and banking systems "were strong". However he underlined that "there has been no lack of action from the government, we simply didn't need measures for the financial sector", but he anticipated that the export sector and investments will be stimulated. Although not many details of the stimulus measures were anticipated Garcia said that of immediate enforcement will be the cash reimbursement of taxes to exporters, contrary to the current policy of fiscal credits. The minister also promised a more flexible exchange rate for the Uruguayan peso which so far this year has depreciated in the range of 25% against the US dollar. Garcia underlined that Uruguay has several strong assets on its balance sheet: macroeconomic equilibrium; structural reforms; a solid institutional framework; a dynamic investments policy and significant social participation in growth rates. "All this makes us feel confident that Uruguay will be distant from a recessive scenario in 2009", forecasted Garcia. Masoller indicated that the measures adopted world-wide to support the financial system: liquidity injection; rescuing banks; recapitalization; extension of deposit and bank operations guarantees; credit lines for the corporative sector and the coordinated cut of interest rates, have helped sustain the heart of the financial system and are "showing a dim light at the end of the tunnel" "The short term challenge is re-establishing confidence, ensuring the payments system and avoiding recession", concluded Masoller. Uruguay's GDP is expected to expand close to 10% this year and only two months ago official estimates for 2009 were in the range of 6 to 7%.