MercoPress. South Atlantic News Agency

Uruguay expands record 8.5% in 2010; forecasts 6% this year

Massive investments and surging foreign trade have boosted the economy

The Uruguayan economy completed in 2010 the eighth year running of expansion having recorded 8.5%, which together with 2008 and 1998 makes them the best three years of the last two decades. Uruguay managed to skip the 2009 global recession with a 2.9% expansion.

According to the latest release from the Central bank, the Uruguayan government anticipates growth will continue albeit at a lower rate and with a horizon of “greater uncertainty” because of food and energy prices arising from the situations in Japan, Middle East and North Africa and global speculation with commodities.

Nevertheless it anticipates the economy will expand close to 6%, the budget was calculated on a 5% growth. For 2012 the estimate is 4%.

The 8.5% growth was based on a strong domestic demand from the private sector which boosted retailing, transport and power consumption.

Looking ahead private consultants, and multilateral organizations such as the IMF and World Bank, are warning that the expansion of the Uruguayan economy under the current infrastructure is close to its supply capacity and this could lead to a surge in prices.

The fourth quarter of 2010 expansion was 1.5% over the previous quarter and 6.5% over the same quarter of 2009. This means that the first quarter of 2011 has an inertial “floor” of 1.9%.

However in year-on-year terms, revised data showed growth slowed from the third quarter when it was 7.7%.

Uruguay’s GDP in 2010 reached 40.28 billion US dollars which means a per capita income above 12.000 US dollars. GDP per capita expanded from 9.427 USD in 2009 to 12.042 USD in 2010, but with an appreciation of the Uruguayan Peso against the US dollar of 11.1%.

Overall the major contributors to expansion in 2010 were private domestic demand 11.4%; investment, 13.2% and goods and services exports, 9.1%, while imports surged 16.5%.

More specifically in retailing, repair services, restaurants and hotels the increase was 14.8% boosted by sales of autos and other imported goods helped by the strong peso.

Transport, storage and communications jumped 14.6% pushed by sales of mobile phones and the expansion of cargo hauling, as well as an excellent cyclical performance from the supply of power, drinking water and gas. Abundant rainfall was decisive for Uruguay’s electricity generation, which is 80% hydroelectric.

Construction recorded a 4.3% growth; manufacturing, 3.7%; agriculture, livestock and forestry, 1.1% and other activities, 2%.