Uruguay: GDP growth slows in Q3, but remains robust nonetheless
The economy expanded 5.9% year-on-year in the third quarter, after having increased 11.4% in the second quarter of last year. A fading base effect was primarily behind the slowdown, as output increased robustly in sequential terms.
Household spending growth eased to 2.0% in Q3 (Q2: +8.1% yoy), while fixed investment growth moderated to 17.1% (Q2: +29.0% yoy). Moreover, government consumption growth decelerated to 14.6% in the third quarter (Q2: +18.7% yoy).
On the external front, exports of goods and services rose 28.5% year-on-year in Q3 (Q2: +26.5% yoy), and imports of goods and services increased 27.6% (Q2: +36.8% yoy).
Looking ahead, economic growth should average lower than its current levels in the short term due to the fading impact of a low base effect, tighter monetary policy and heightened inflationary pressures. That being said, an improving labor market and the ongoing easing of Covid-19-related restrictions should support domestic demand. Moreover, strong investment, including USD 3 billion in the construction of a pulp plant and some additional infrastructure spending, will also bolster the economy. On the external side, healthier foreign demand for agricultural exports and recovering tourism should benefit exports of goods and services. The possibility of a worsening health situation both domestically and abroad poses a key risk to the outlook.