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Uruguay: Economy deteriorates in Q2, GDP contracts for first time in 12 years

September 16, 2015

In Q2, GDP contracted for the first time in 12 years, falling 0.1% over the same quarter last year. The decrease contrasted Q1’s healthy 4.5% growth rate. According to the Central Bank of Uruguay, Q2’s contraction largely resulted from the adverse impact of draught on hydroelectric production in this period, coupled with shrinking domestic demand and a slowing external sector.

On the domestic side of the economy, total consumption dropped 0.7% in Q2, which represented the worst reading on record and contrasted the 2.4% increase recorded in Q1. Private consumption also contracted and registered a 1.1% drop in Q2, which contrasted Q1’s 2.4% growth. While government spending continued to expand, it decelerated from Q1’s 2.3% expansion to 2.1% growth in Q2. Finally, fixed investment declined significantly, swinging from Q1’s 1.2% growth to a notable 6.4% contraction in Q2.

Exports of goods and services deteriorated and fell 1.4% in the second quarter of the year, which contrasted the 6.6% increase tallied in the previous quarter. Imports swung from a 1.1% expansion in Q1 to a 2.6% decline in Q2. As a result, the contribution of the external sector to overall growth receded from 4.2 percentage points in Q1 to 2.0 percentage points in Q2.

A quarter-on-quarter comparison confirms the deterioration evidenced by annual growth figures. The economy dropped 1.8% in Q2 over the previous quarter in seasonally-adjusted terms, which marked the worst result since Q3 2011 and contrasted Q1’s 0.6% rise.

Panelists participating in the LatinFocus Consensus Forecast expect GDP to grow 2.9% in 2015, which is unchanged from last month’s forecast. For 2016, the panel sees economic output expanding 3.0%.


Author: Teresa Kersting, Economist

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Uruguay GDP Q2 2015

Note: Year-on-year changes of GDP in %.
Source: Uruguay Central Bank (BCU) and LatinFocus Consensus Forecast.


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