Uruguay Bets on Recovery While Growth Forecasts Fall

The Budget Accountability Bill and the promise of recovery dominate Uruguay's economic agenda

The Frente Amplio government this week unveiled its 2025 Rendición de Cuentas against a macroeconomic backdrop that blends conflicting signals: a first quarter that confirmed the return to growth, activity indicators that have yet to consolidate momentum, and a sovereign risk premium touching historic lows. Economy and Finance Minister Gabriel Oddone was the leading figure through an intense stretch of meetings spanning the Cabinet, Parliament and business chambers, working to sustain the narrative that the country "is slowly beginning a path of recovery," in his own words as reported by La Diaria.

The most concrete data point of the day was GDP growth of between 0.8% and 0.9% in the first quarter of 2026 relative to the previous quarter — different sources report slightly different figures — driven by private consumption and exports, though with a marked contraction in agriculture on the back of falling soy and rice output and the lingering effects of drought, according to Infobae. The reading is welcome but insufficient: Uruguay closed 2025 with annual growth of just 1.8%, below both official and IMF forecasts, and the World Bank has already cut its projections for 2026 to 1.6% and for 2027 to 1.7%, warning that the country, once a regional "superstar," has lost ground. Oddone acknowledged that "there is a fairly high probability that we will revise downward the growth expected for 2026," a remark that resonated across markets and was reproduced verbatim by La Diaria.

Against this backdrop of cyclical moderation, the Rendición de Cuentas envisions additional spending of just USD 31 million — a surgical figure for a country managing inherited fiscal constraints — with the stated goal of reducing child poverty by 25%, according to the Cabinet as cited by El Observador. Oddone was categorical in noting that this incremental spending will be financed with new revenues already approved in 2025, including the global minimum tax on multinationals — expected to raise USD 350 million, per La Diaria — and the extension of the IMESI excise tax to imported electric vehicles valued above USD 19,000. This latter measure has generated unusual friction within the Cabinet itself: the Environment and Industry ministries voiced public reservations about a decision they regard as incompatible with the energy transition agenda, though director Vallcorba himself sought to play down the impact by noting that "66% of vehicles will not be affected in any way." The government, in any case, reaffirmed that there will be no spending expansion beyond what is envisaged in the 2027 Budget.

Country risk hit lows not seen since 2018, and the market projects the downward trend will continue — a signal that reflects international confidence in Uruguay's institutional strength even as growth disappoints. That confidence has a concrete counterpart on the debt front: the Ministry of Economy carried out an operation that included issuance, reopening and buyback of global bonds, and placed peso-denominated Treasury Notes with demand that doubled expectations and a yield below 7%, confirming market appetite for Uruguayan assets. The MEF is also taking its first formal steps toward charting a path to OECD membership, a move that would give the country a long-term institutional anchor akin to the one that once catalyzed structural reforms in Chile and Mexico.

On the microeconomic front, concerns persist. Credit to households has now posted seven consecutive months of decline and non-performing loans show no sign of easing, according to El Observador — a signal that the consumption impulse rests on fragile foundations. The Ceres Leading Index offers mixed readings: it rose 0.3% in May — two consecutive months of improvement — but slipped again in the latest reading, reinforcing the signs of softness with which the economy entered 2026, in the think tank's own words. Meanwhile, FAECyS — the federation representing commerce employees — opened wage bargaining talks with a review under way, and at AEBU, leader José Iglesias called for salary increases in the banking sector on the back of strong system-wide results. In agriculture, the wheat harvest is expected to contribute close to USD 3.9 billion to the economy after record production, while horticultural exports reached their highest value in 22 years — two pieces of good news that partly offset weakness in summer grains.

In parallel, the Central Bank unveiled a draft bill to create an open finance system, a reform aimed at modernizing financial infrastructure and strengthening the fintech ecosystem in line with the more than 240-measure bill — one that runs "from toothpaste to fintech," in the government's own words — put forward by the Executive as the Competitiveness and Cost of Living Reduction Project. The knowledge economy, for its part, posted record figures that, according to El Observador, force a rethink of the strategy for the coming decade.

Minister Oddone also appeared before the Senate in an interpellation on the economic situation and the changes envisaged for the AFAPs — which he himself declined to characterize as "nationalization," dismissing such a description as "an exaggeration" — and emerged backed by Frente Amplio votes. On external pressures, Oddone was explicit: the government is resisting daily pressure from Washington to sever commercial ties with China and views the prospects of the Mercosur–European Union agreement with growing optimism. "We are closer to Europe than to the United States in our economic management," the minister declared, as El Observador reported — a phrase that captures both the government's ideological orientation and its geopolitical bet.

What lies ahead is decisive: parliamentary approval of the Rendición de Cuentas bill, second-quarter activity data and the trajectory of consumer credit will be the most reliable gauges of whether the recovery Oddone is promising rests on solid foundations or whether Uruguay resigns itself, as some analysts warn, to growing persistently below its potential.

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**Ministerio de Economía y Finanzas de Uruguay (sovereign)** — The MEF placed peso-denominated Treasury Notes with demand that doubled the offered amount and a yield below 7%, confirming investor appetite for local debt at a moment when country risk is touching 2018 lows. The operation complements an issuance, reopening and buyback of global bonds carried out in the same week, consolidating the government's liability management strategy.

**Forestry investment in Rivera