IMF Concludes 2026 Consultation With Uruguay

Washington, DC: The Executive Board of the International Monetary Fund (IMF) completed the Article IV Consultation for Uruguay ^[1] . The authorities have consented to the publication of the Staff Report prepared for this consultation.

Growth moderated to 1.8 percent in 2025 as temporary refinery and cellulose plant shutdowns reduced manufacturing output, while a drought weakened agriculture since the third quarter of 2025. The rest of the economy has been growing around potential, supported by private consumption as inflation declined and the peso appreciated. Unemployment was 7.2 percent in August 2026, near its historical low, although youth unemployment remains high. The fiscal targets were met in 2025 despite the slowdown. Inflation has been within the central bank's tolerance range for virtually all of the past three years, reflecting a proactive monetary policy. Inflation was 4.7 percent in September 2026, with expectations anchored around the 4.5 percent target. The current account deficit was small, at 0.5 percent of GDP in 2025, and the banking system remains well capitalized, liquid, and profitable, with contained systemic risks.

Growth is expected at 1.3 percent in 2026, reflecting the effect of the drought, and projected at 2.4 percent in 2027 as the output gap narrows, supported by private consumption and investment. The fiscal deficits in 2026 and in 2027 are expected to remain in line with the objectives of the five-year budget, starting a consolidation that will cumulate to 1½ percent of GDP by 2029. Inflation should remain at the 4.5 percent target. The current account deficit is expected to widen slightly to 1.4 percent of GDP in the medium term, in line with fundamentals. Risks are tilted to the downside, mainly from tighter global financial conditions, oil price shocks, geoeconomic fragmentation, and adverse weather events. Favorable market access and ample liquidity buffers mitigate near-term fiscal risks, while risks to capital flow reversals are mitigated as most external liabilities are from FDI. Upside risks include stronger agricultural revenues, expanded market access and investment thanks to the EU-Mercosur agreement, and larger-than-expected gains from supply-side reforms.

Executive Board Assessment ^[2]

In concluding the 2026 Article IV consultation with Uruguay, Executive Directors endorsed staff's appraisal as follows:

Growth moderated to 1.8 percent in 2025, reflecting weaker agricultural and manufacturing output. While growth in 2026 is projected at 1.3 percent due to the effect of last year's drought on agricultural production, the rest of the economy is growing around potential, supported mainly by private consumption as lower inflation boosted real wages. Despite the slowdown, fiscal targets in 2025 were met and are on track to be met in 2026.

The country continues to demonstrate resilience underpinned by strong institutions and credible policy frameworks. The direct macroeconomic effects of the oil price shock and heightened global trade policy uncertainty have been limited, supported by Uruguay's high share of renewable energy and favorable export prices. Uruguay continues to benefit from robust market access, with sovereign spreads that remain the lowest in the region and near historical lows.

The five-year budget and the 2026 budget update aim to reduce the fiscal deficit by raising revenues, and to stabilize public debt over the medium term. In the context of a negative output gap, the authorities' decision to maintain the objectives of the medium-term budget is commendable. Additional efforts to bring the CG-BPS primary balance to ½ percent of GDP by 2029 would help bring the debt-to-GDP ratio on a downward path and generate buffers that could be used if global financial conditions tighten or if a major crisis requires fiscal action. The recent reforms of the fiscal framework are welcome. Its effective implementation, as well as the efforts to improve fiscal transparency, will strengthen credibility and foster debt sustainability. Strong debt management, including progressive de-dollarization, is mitigating rollover, interest rate, and exchange rate risks. Uruguay is a pioneer in climate finance, which has allowed it to widen its investor basis and secure innovative multilateral institutions' financing.

The BCU has successfully navigated a range of shocks by responding swiftly and appropriately. Further refinements of the IT framework, including via formal reviews, and ongoing efforts to de-dollarize the financial sector and to develop capital markets will help achieve low and stable inflation and will support growth.

The banking system is well capitalized, highly liquid and profitable, with FX risks contained. The authorities remain committed to strengthening the regulatory, supervisory and macroprudential frameworks. The recent expansion of the regulatory perimeter and further improvements to the AML/CFT framework will help reduce financial vulnerabilities.

With macroeconomic stability preserved, boosting potential growth is Uruguay's central policy challenge. The government is advancing a supply-side reform agenda to raise productivity and accelerate convergence toward advanced-economy income levels. The Competitiveness Law and Uruguay Innova should improve the business environment, encourage investment, and support innovation. Further reforms of state-owned enterprises, including better alignment of wages with productivity and cost-reflective pricing, would help lower production costs and strengthen competitiveness. Expanding labor supply and strengthening human capital is also critical to sustaining growth amid demographic pressures. Efforts should focus on narrowing gender gaps in labor force participation, attracting skilled workers, and aligning more closely education and training with labor market needs.

^[1] Under Article IV of the IMF's Articles of Agreement, the IMF holds bilateral discussions with members, usually every year. A staff team visits the country, collects economic and financial information, and discusses with officials the country's economic developments and policies. On return to headquarters, the staff prepares a report, which forms the basis for discussion by the Executive Board.

^[2] Under the IMF's Articles of Agreement, publication of documents that pertain to member countries is voluntary and requires the member consent. The staff report has been published on the www.imf.org/uruguay page.