Uruguay: GDP growth moderates in Q2
GDP growth lost steam, falling to 7.7% year on year in the second quarter from 8.2% in the first quarter, on a tougher base of comparison.
The downturn was driven by weakening growth in private consumption, fixed investment and exports. Private consumption increased by 5.6% in the second quarter, which was below the first quarter’s 6.7% expansion. Meanwhile, fixed investment growth fell to 8.3% in Q2, marking the lowest reading since Q1 2021 (Q1: +15.1% yoy). However, government consumption improved to an 8.0% expansion in Q2 (Q1: +5.5% yoy). Turning to GDP by industry, agricultural output accelerated drastically to 17.2% in Q2 from a 3.8% increase in Q1 due to a strong soy harvest.
Exports of goods and services growth fell to 16.3% in Q2, marking the worst result since Q1 2021 (Q1: +22.6% yoy). In addition, imports of goods and services growth moderated to 9.7% in Q2 (Q1: +18.1% yoy), marking the worst reading since Q1 2021.
On a seasonally-adjusted quarter-on-quarter basis, economic growth improved to 1.1% in Q2, compared to the previous period’s 0.5% expansion.
Looking ahead, growth is seen slowing down in the upcoming quarters as the base effect from the pandemic fades. Elevated inflation will dent private consumption, while higher interest rates will cool the economy. Additionally, the expected global economic slowdown bodes poorly for Uruguay’s exports of food and other commodities. Although several panelists expect a slowdown in 2023, a strong Q2 reading led several of them to revise their forecasts for 2022 upwards.
Analysts at the EIU stated:
“Given the better than expected second-quarter result, we will be revising up our GDP growth estimate for 2022 to over 5%, from 4.7% currently. However, owing to a higher base of comparison and growing headwinds to growth (such as a global economic slowdown in 2023), we are likely to revise down next year’s growth forecast, from 2.8% currently.”
Meanwhile, analysts at Fitch Solutions commented:
“We have raised our forecast for real GDP growth in Uruguay to 4.7%, from 3.8% previously, following a robust economic performance in H122. Despite this revision our core view remains that growth will slow from H222 amid headwinds from higher inflation, monetary tightening and weakening external demand. We expect this trend will continue in 2023, when we expect GDP growth will ease further to 2.8% in line with a sharp regional slowdown.”