Uruguay is forecasted to achieve steady economic growth and maintain inflation near its central bank target in 2025, according to the International Monetary Fund (IMF) Executive Board, which today concluded its annual Article IV Consultation.
The Fund’s Directors commended Uruguay’s resilient economy. Still, they issued a clear call for the new administration to intensify fiscal consolidation efforts and accelerate structural reforms to ensure long-term stability and enhance global competitiveness.
Following a robust economic expansion of 3.1 per cent in 2024, fueled by a surge in agricultural exports and inbound tourism, real Gross Domestic Product (GDP) growth is expected to moderate to 2.5 per cent in 2025. This growth is projected to be driven by a sustained recovery in real wages, decreased domestic uncertainty, and strong export performance.
In a positive development for price stability, inflation has fallen below the central bank’s target, clocking in at 4.2 per cent in August 2025. The IMF projects inflation will converge around the 4.5 per cent target for the year, allowing for a gradual easing of monetary policy that began in July. While the economy remains sensitive to global commodity prices and regional events, ample liquidity buffers are seen as a safeguard against near-term risks.
The executive board directors were supportive of the government’s commitment to prudent fiscal policy, particularly its five-year budget plan designed to reduce the deficit and stabilise debt. However, they raised a red flag regarding the rise in the central government’s fiscal deficit to 3.2 per cent of GDP in 2024, an increase that triggered the fiscal rule’s “escape clause.”
With the deficit expected to increase further in 2025 due to inherited fiscal momentum, the Directors restated that the “steadfast implementation of the fiscal rule” is paramount. They urged the authorities to consider additional fiscal efforts to ensure the debt-to-GDP ratio is placed on a firm downward trajectory. Proposed enhancements to the fiscal rule and the establishment of a strengthened fiscal council were welcomed by the board as steps in the right direction.
Beyond macroeconomic management, the IMF stressed that Uruguay must implement structural reforms to unlock potential growth and boost productivity. Key recommendations from the board focused on improving the nation’s human capital and business environment.
Directors specifically encouraged the government to enhance educational outcomes, better leverage the country’s AI readiness, and improve overall competitiveness by streamlining business regulations and facilitating trade to remove regulatory bottlenecks. Additionally, the Board welcomed the government’s proposals for wage negotiations, noting that the plan seeks to boost low incomes while contributing to de-indexation efforts across the economy.
