IMF recommends Uruguay pensions, state enterprise reform
The International Monetary Fund recommended Uruguay's government to prioritize certain reforms in order to control expenses and reduce long-term debt.
"Directors encouraged the authorities to introduce measures to put public debt on downward path. They also recommended that adjustment efforts should focus on reducing current expenditure while further improving its efficiency to increase capital spending," IMF said in a statement after the executive board concluded its 2018 IV Article consultation with Uruguay.
"Priority should also be given to making further progress on the reforms of the pension system and the state‑owned enterprises," it added.
The IMF directors noted that fiscal deficit reduction has stalled and that the time to reach the target of 2.5% of GDP has been extended to 2020. "The 12-month rolling fiscal deficit stood at 3.8% of GDP in November 2018 (excluding the impact of a large transaction related to pension asset transfers), suggesting that attainment of the 2018 objective (3.3% of GDP) and 2020 target is difficult."
Despite the challenges, the Uruguayan economy has displayed a positive performance in recent years but it is likely to lose steam in 2019 due to the economic woes of neighboring Argentina.
IMF forecasts that Uruguay's GDP will expand 1.9% this year after an estimated expansion of 2.1% last year. The annual inflation rate is projected to end this year at 7.8% compared with 7.6% in 2018.
Meanwhile, unemployment is likely to reach a peak this year to 8.7% compared with 8.3% last year.
Financial sector
The Uruguayan financial sector has remained resilient despite regional market turmoil, "reflecting limited linkages to Argentina and enhanced supervision since the 2002 crisis."
Banks enjoy comfortable buffers due to improvements in the regulatory capital to risk-weighted assets ratio and profit generation.
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News in: Political Risk & Macro (Uruguay)
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