Uruguay: Growth picks up pace in Q1
The economy kicked off the year on stronger footing, with year-on-year growth accelerating from the previous quarter’s 2.0% to 2.2% in the first quarter of 2018, according to data released by the Central Bank on 18 June. The print marked the second consecutive quarter of accelerating growth but was considerably below the multi-period high of 4.1% clocked in the same quarter a year ago. The reading also came in significantly above market expectations of a more moderate 1.4% year-on-year increase.
The stronger performance in Q1 was led by a marked improvement in investment activity. Fixed investment fell 2.2% year-on-year in Q1; nevertheless, the figure was a notable improvement from the previous quarter’s 6.3% fall. Meanwhile, annual private consumption growth moderated significantly in Q1 on the back of deteriorating labor market conditions, coming in at 2.8% in the quarter (Q4 2017: +4.6% year-on-year). Government consumption remained nearly flat in the first quarter (Q1: -0.3% yoy), a stark improvement to the previous quarter’s 2.3% annual contraction. Total consumption growth, however, moderated from 3.7% in the previous quarter to 2.4% in the first quarter.
On the external front, export growth moderated for a third consecutive quarter in Q1, dropping to the lowest rate since Q3 2016. Exports rose 4.6% year-on-year, decelerating from Q4’s 7.0% growth. Nevertheless, the external sector’s contribution to GDP growth swung from negative 0.1 percentage points in Q4 to 0.2 percentage points due to a significant moderation in import growth. Imports increased 3.7% in annual terms in Q1, down from the previous quarter’s 6.0%, in the face of cooling domestic demand.
On a quarter-on-quarter basis, the economy expanded a healthy 1.1% in Q1 in seasonally-adjusted terms, matching the previous quarter’s print.
Commenting on the release, Marina Valentini, Economist at HSBC, said:
“In a conference call on 13 June, the central bank president Mario Bergara said that external shocks coming from uncertainty in Brazil and macro imbalances in Argentina put the central bank’s strategy of risk management and economic growth to the test. […] Nevertheless, several positive developments such as the potential new pulp mill and related infrastructure projects, cheaper renewable energy sources, productivity gains and other factors make the Uruguay’s economy more resilient, in our view.”