The Uruguayan economy performed better than expected in the second quarter of 2009, having advanced 0.5% over the previous quarter and 0.2% over the same period a year ago, according to the latest release from the Central Bank.
In the first quarter of the year the Uruguayan economy had contracted 2.9% compared to the last quarter of 2008.
As a result of the latest data, Uruguay’s GDP in the first half of 2009 expanded 1.5%.
The Central Bank report indicates that most sectors of the economy recovered in the second quarter except for agriculture (minus 2.8%) and power, gas and water that contracted on average 20%.
The agriculture fall was mainly in livestock because of a weaker international demand for beef and the several months long drought which was partly compensated with an increase in the crops of soy beans, sorghum and wheat.
Power generation contracted 20% because of the lack of rainfall which forced the country to appeal to thermal generation and imports from neighbouring Brazil. Uruguay’s power is mainly hydroelectric.
Manufacturing was down 5.3% year to year, with a double contraction of domestic and external demand. Nevertheless a strong performance from the pulp, oil refining, dairy and other food products sectors helped to moderate the fall in meat packing, textiles, skins and the chemical industry.
Construction which has been booming for several years resumed growth having recorded 6% expansion in the second quarter. Transport and Communications also proved dynamic given the sustained demand for cellular phones.
“We didn’t experience two consecutive negative growth quarters, which means Uruguay was never in recession”, said Central Bank sources following the release of the latest data.
The Uruguayan government had anticipated a GDP expansion of 0.7% for 2009, down from the previous forecast of 2% in April. Current data and projection anticipate the economy will end the year with a modest growth below 1%.
What will expand is the fiscal budget deficit which only a couple of months ago was announced at 2% of GDP. Now it is estimated at 2.6% mainly because of the “power over-cost” generated by the drought which forced Uruguay to appeal to thermal turbines and imported power. Uruguay imports all its fossil fuels.