Uruguay GDP Q4 2016


Uruguay: Economy accelerates on the back of stronger domestic demand

March 31, 2017

Uruguay’s economy accelerated notably in the final quarter of 2016. In Q4 2016, GDP grew 3.4% from the same month last year, according to detailed data released by the Central Bank on 31 March. The reading came in well above Q3’s 1.1% year-on-year expansion and marked the best result since Q1 2015. The improvement came on the back of a notable acceleration in fixed investment and private consumption growth, and brought full-year 2016 GDP growth to 1.5%, up from 0.4% in 2015. This shows the economy has begun to turn a corner following the sharp slowdown brought on largely as a result of recession in neighbors Brazil and Argentina.

Growth in Uruguay continues to be underpinned by recovering domestic demand, while the external sector once more contributed negatively to growth. In particular, fixed investment jumped 10.7% in Q4 in annual terms, from Q3’s mild 0.4% expansion. The reading was the result of a surge in both private and public fixed investment—mainly in machinery and equipment. Private consumption also improved, accelerating from Q3’s 0.7% increase to a seven-quarter high of 1.3% in Q4, while government consumption lost some steam, rising 1.4% compared to a 2.0% expansion in Q3, as the government kept spending on a leash in an attempt to tame the budget deficit.

Exports accelerated from Q3’s 1.0% growth to a stronger 3.6% expansion in Q4, mainly on the back of a growing tourist sector. At the same time, imports swung from a mild 0.5% contraction in the third quarter to a robust 5.8% expansion in Q4, due to higher consumer and capital goods imports, with the latter pushed up by the ramp-up in fixed investment. As imports grew more than exports, the external sector’s contribution to growth deteriorated, subtracting 1.0 percentage point from the overall result.

On a quarter-on-quarter basis, the economy expanded 1.5% in Q4 in seasonally adjusted terms, which came in above the 0.8% expansion logged in Q3.

Panelists participating in the LatinFocus Consensus Forecast expect GDP to grow 1.0% in 2017, which is unchanged from last month’s forecast. For 2018, the panel sees economic output expanding 2.1%.

Author: Massimo Bassetti, Economist

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