MercoPress. South Atlantic News Agency

Uruguay enjoys 'positive discrimination' but must lift investment and productivity, BBVA says

The bank forecasts that Uruguay's economy will grow 1.3% this year, below the 2.2% projected in the Budget law and the 1.6% to which the Ministry of Economy later adjusted its estimate

Uruguay enjoys a “positive discrimination” relative to other economies for its institutional solidity, respect for agreements and political maturity, but its economic growth has been low over the past decade and its potential GDP —now at 2.1%— is declining. That was the assessment of economists from BBVA Research, one of Europe's largest banks, at the “Situación Uruguay” webinar, where they said the country's main challenge is to boost investment and raise productivity.

The bank forecasts that Uruguay's economy will grow 1.3% this year, below the 2.2% projected in the Budget law and the 1.6% to which the Ministry of Economy later adjusted its estimate. “When the government set GDP growth of 2.2% in the Budget law, it was already much higher than our projection,” said economist Adriana Haring. For 2027, BBVA Research expects expansion of 1.8%, driven by consumption and exports, and holds that the country maintains solid macroeconomic fundamentals, controlled inflation and favorable access to financing.

The main problem, according to the firm, is investment, which represents 16% of GDP, below several countries in the region and nations with similar characteristics; for reference, China reaches 39%. Among the causes, the economists cited low productivity, limited adoption of new technologies, reduced business scale, limited international insertion —attributed partly to Mercosur regulations, which have prevented Uruguay from signing agreements with other countries—, logistics costs and a lack of alignment between productivity and wages. Their hopes, they added, rest on new investment, on the Mercosur-European Union agreement —where Uruguay starts with an advantage owing to its energy transition— and on greater incorporation of artificial intelligence.

On the fiscal front, BBVA Research projects a deficit of 4.7% of GDP this year and 4.6% in 2027, and estimates that fiscal convergence will be more gradual than the one set in the Budget, constrained by the rigidity of spending in areas such as security, childhood and social policy. Inflation would stand at 4.5%, with the monetary policy rate stable at 5.75%, and the dollar would reach 41 pesos in December. Inflation expectations, they noted, “remain anchored.”

On the labor market, the bank expects unemployment of 7.5%, with no deterioration but also no significant job creation in a slow-growing economy; youth unemployment remains around 24%. Goods exports continue to be concentrated in few products —beef, cellulose, soy and dairy exceed half the basket— and in few markets. Asked about Argentina, the specialists said that, despite the improvement in its indicators, investors will keep seeing Uruguay as a “safe destination.”