Uruguay Economic Outlook
High-frequency data suggests that the economy slowed further in Q4. Both industrial production and merchandise exports contracted in the quarter as global headwinds intensified. Meanwhile, survey data indicates that retail activity was broadly unchanged from its Q3 levels. Turning to Q1 2023, the economy is seemingly gaining momentum. Merchandise exports returned to growth in January, while industrial activity benefitted from lower producer prices in January and February. Moreover, private spending is likely to pick up thanks to the ongoing downtrend in consumer price inflation. Going forward, households’ purchasing power should enjoy additional tailwinds: On 2 March, President Lacalle proposed a broad-based tax cut worth around USD 150 million, which is set to affect 75% of taxpayers.
Inflation eased to 7.6% in February from January’s 8.0%. February’s decline was chiefly driven by a slowdown in food and transport inflation. That said, prices for housing and utilities increased at a sharper rate. Inflation is seen easing in the coming months but still ending the year above the Central Bank’s 3.0–6.0% target range.