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Uruguay 2012 GDP expanded 3.9% boosted by construction and domestic demand

Thursday, March 28th 2013 - 10:03 UTC
Full article 8 comments
Construction and domestic demand helped prop the Uruguayan economy in 2012 Construction and domestic demand helped prop the Uruguayan economy in 2012

Uruguay’s GDP expanded 3.9% last in 2012 over the previous year despite a slight contraction in the fourth quarter, according to a late Wednesday release from the Central bank. The bank’s original estimate was 4%. In 2011 the economy grew a revised 6.5%.

In the fourth quarter the economy expanded 4.8% over a year earlier but contracted 0.1% from the third quarter. However in 2012, activity in almost all sectors was sustained except for government services (power, gas and water) and in farming.

The first is attributed to lower prices, given the Uruguayan government’s efforts to contain inflation by freezing utility rates and for faming which included agriculture, livestock and forestry, volume and prices increases were below the economy’s average.

However construction continues to boom expanding 8.9% in 2012 as well as transport and communications, 6.7% and other activities, 36.9%.

“The annual GDP by expenditure components followed a strong expansion of domestic demand both from final consumption as well as capital formation”, said the Central bank release.

Families’ final consumption increased 6.5% and became one of the main growth factors for the Uruguayan economy in 2012. Private investment also helped significantly for the expansion of capital formation growth, said the bank.

But the trade balance worsened in 2012 compared to 2011 since exports expanded 1.6% and imports, 13.6%. This was the tenth straight year of growth for the Uruguayan economy boosted by the strong international demand for commodities and soaring prices, plus rock bottom global interest rates which attracted massive inflows of capital.

In this scenario inflation remains a major challenge: although it slowed slightly in 2012 to 7.48%, it was again well above the central bank’s target of 4% to 6%.

Faced with the ongoing situation and a budget deficit that tripled in twelve months from 0.9% to 2.8% of GDP, the Central bank raised the benchmark interest rate 25 points to 9.25% last December but had them on hold in March. Nevertheless bank reserves in Uruguayan Pesos and US dollars were increased considerably.

The government has forecasted 4% growth in 2013 but private analysts are not as optimistic as the economy seems to be slowing down and key trade partners also have their own problems.

Top Comments

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  • ChrisR

    Other than the incompetent directors of UTE who masterminded FOUR price rises in 2012 and one in 2013 so far, I have not met anybody who has increased their income by more than the inflation figure.

    I also do not know of anybody who thinks inflation for 2012 was 7.48%. I have run an Excel spreadsheet covering all our expenses since we arrived in UY not quite 2 years ago and can prove that the figure is certainly nearer 10%. Considering we are retired and own our own very nice house here and have no children or dependants I shudder to think what the inflation rate is for young families: it must be greater than 12%.

    So given that “Families’ final consumption increased 6.5% and became one of the main growth factors for the Uruguayan economy in 2012” why is this surprising? The families MUST have cut back on their living standards to produce this low figure.

    The government MUST get a hold of inflation very, very soon or risk a runaway that will be very difficult to stop. The forecast in growth for 2013 seems to follow the level of incompetence expected from having two competing government departments running the economy.

    Why should this government be able to run a balanced economy when their only response was to freeze prices, not deal with the root cause of the trouble: their own profligacy?

    Mar 28th, 2013 - 05:51 pm 0
  • redpoll

    Its credit cards which most families cant or wont pay back Chris

    Mar 28th, 2013 - 09:04 pm 0
  • aedi

    If you don't like it, go back where you came from !!
    Who invited you to that “horrible” country anyway ?

    Mar 29th, 2013 - 07:31 am 0
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