GDP growth inches down in the first quarter

Economy remains robust: GDP growth waned to 3.4% year on year in the first quarter from 3.5% in the fourth quarter of last year, marking the third consecutive deceleration. Still, economic growth held its ground, outperforming the 10-year pre-pandemic average and ranking among the fastest in Latin America. On a seasonally adjusted quarter-on-quarter basis, economic growth ticked up to 0.5% in Q1, following the previous period's 0.3% expansion.

Softer private consumption drags on growth: Domestically, the primary drag on the year-on-year expansion came from private spending, whose growth slowed to 2.1% in Q1 from 2.7% in the previous quarter, likely weighed down by rising unemployment. On the flip side, public expenditure growth surged to a near three-year high of 4.3% (Q4 2024: +3.3% yoy), largely reflecting a greater number of school days compared to the same period last year. Fixed investment growth held steady at Q4 2024’s 4.2% in Q1, with robust capital outlays in equipment and machinery offset by waning momentum in construction sector investment. Externally, exports of goods and services rose 4.2% year on year in Q1, slightly underperforming Q4 2024’s 4.4% gain. Meanwhile, imports growth accelerated to 5.6% (Q4 2024: +3.8% yoy). As a result, net exports detracted 0.1 percentage points from overall GDP growth, contrasting the 0.3 percentage point contribution in Q4 2024.

External sector to weigh on GDP growth: Economic growth is expected to lose further steam in Q2 and then broadly stabilize in H2, dipping below its pre-Covid decade average of 2.9% because of higher trade frictions and interest rates. As a result, our Consensus is for GDP growth to moderate in 2025 compared to 2024. A fading base effect—following the near-complete recovery from the 2023 drought—and mounting U.S. protectionism are set to take a toll on exports. Even so, domestic demand should offer a cushion: Household spending is projected to pick up, supported by a tightening labor market, increased public investment and higher social outlays. That said, weaker-than-expected economic growth in key trading partners, notably Brazil and China, remains a key downside risk to the outlook.

Panelist insight: Commenting on the outlook, Itaú Unibanco analysts stated: “Our 2025 GDP growth forecast of 2.3% has upside risks, mainly due to last year’s carryover and a record harvest. Private consumption and spillovers from the macro adjustment in Argentina will likely continue to support growth.”

How should you choose a forecaster if some are too optimistic while others are too pessimistic? FocusEconomics collects Uruguayan government consumption projections for the next ten years from a panel of 9 analysts at the leading national, regional and global forecast institutions. These projections are then validated by our in-house team of economists and data analysts and averaged to provide one Consensus Forecast you can rely on for each indicator. By averaging all forecasts, upside and downside forecasting errors tend to cancel each other out, leading to the most reliable government consumption forecast available for Uruguayan government consumption.

Download one of our sample reports to visualize what a Consensus Forecast is and see our Uruguayan government consumption projections.

Want to get access to the full dataset of Uruguayan government consumption forecasts? Send an email to info@focus-economics.com.