MercoPress. South Atlantic News Agency

Roubini forecasts Uruguay needs additional measures to contain inflation

Growth in 2011 will be speared by a robust domestic demand

Roubini General Economics, RGE, founded by Nouriel Roubini the economist described as Dr. Doom for having predicted long before his peers the US financial and mortgage crisis said the Uruguayan government must apply additional measures to higher rates and bank reserves, to help contain inflation.

The report said the increase in banks’ technical reserves was “welcome” and positive but at the same time points out they came “a bit too late” since the dynamics of inflation has increased in recent months given the “insufficient rise in the reference rate”.

The decision to increase bank reserves reinforces the opinion from RGE that the Central Bank should complement monetary strategy with “administrative measures to control local currency and US dollar liquidity”.

RGE forecasts that the Uruguayan economy should grow 5.2% in 2011 speared by a robust domestic demand.

However “the cooling of the Argentine and Brazilian economies, together with a more restrictive fiscal and monetary policy should help Uruguay with a level of expansion such as we anticipate, and with a moderation of concerns regarding a possible over heating of the economy”.

Finally RGE says that Uruguay’s long term prospects “are promising” given the significant investments component which should enable the country to reach a “potentially higher and sustainable growth in coming years”.

The report was based on available data from Uruguay’s Central Bank.