MercoPress. South Atlantic News Agency

Uruguayan economy set to grow 0.6% this year and 3.5% in 2010, says IMF

IMF economist Oliver Blanchard

Uruguay’s economy is set to grow 0.6% this year and 3.5% in 2010 according to the latest estimates from the International Monetary Fund. This means Uruguay together with Peru will be the only two countries in South America that will expand in 2009. The previous IMF forecast was 1.3% and 2%.

The Uruguayan government estimates are 1.2% in 2009 and 3.5% next year.

IMF estimates inflation to reach 7.5% this year and 7.4% in 2010 which is higher than the forecast of last April, and is above the 3 to 7% target established by Uruguay’s Central Bank.

The announcement was done by Oliver Blanchard during the IMF meetings taking place in Istanbul, Turkey and following the launching of the World Outlook report.

As to the rest of Latinamerica “Brazil will lead a strong recovery” after experiencing a slight contraction this year, 0.7%, followed by 3.5% growth in 2010.

Overall the region has been much better prepared for the crisis than in previous occasions since it has “strengthened its macroeconomic framework” says IMF. Anyhow the region overall is expected to contract 2.5% this year and expand 2.9% in 2010. The worst performers will be Mexico, minus 7.3% and Argentina, minus 2.5%:

The IMF report says that Latinamerica and the Caribbean are showing signals of “stabilization and recovery” because of improved conditions in world financial markets and sustained prices for commodities.

But countries with a strong dependence on energy, such as Bolivia, Ecuador and Trinidad Tobago will suffer significant drops in exports.

More specifically on Peru, the fastest growing economy of the region boosted by investments in minerals and energy, following several years of sustained growth “in the first half of 2009 it virtually stagnated” but a solid recovery is expected in the second half.

As to Venezuela, it will continue to have the region’s highest inflation rate because of its robust government expenditure and lax monetary policy.

Finally the report points out some pending mid term challenges for the region such as stronger fiscal policies, tax and pension schemes reforms, political support for countercyclical measures “taking advantage of the very rich and successful experience of Chile”.