Budget math collapses as Uruguay's growth forecasts face downward revisions.

The Autonomous Fiscal Council has just issued a warning that calls into question the pillars of the Frente Amplio government's Rendición de Cuentas: the body told Parliament that the Ministry of Economy and Finance (MEF) has overestimated the growth projections underpinning the multi-year budget — an accusation that Minister Gabriel Oddone rejected but could not entirely rule out, conceding that there is "a fairly high probability" that the expansion estimates for 2026 will need to be revised downward.

The tension between official projections and the reality of the economic cycle sits at the heart of Uruguay's current juncture. The government projected a rebound anchored in three major engines of private investment: green hydrogen plants, data centers, and new capacity in the pulp sector. These are structural long-term bets with real grounding — Uruguay has built solid credentials in renewable energy and in the knowledge economy, whose services exports posted record growth in the recent period — but they are unlikely to deliver cyclical momentum in the short term. The result is a government arriving at the parliamentary debate over the Rendición de Cuentas with a reactivation narrative that Ceres's own leading indicator of economic activity partly contradicts, having shown signs of softening before stabilizing with a mere 0.2% rise in April following four months without growth.

The macroeconomic picture is that of an economy that grew 1.8% in 2025 — below both official and IMF forecasts — that began 2026 with quarter-on-quarter expansion of 0.8% to 0.9%, depending on the source, driven by private consumption and exports, but that suffered a notable setback in agriculture on the back of falling soy and rice output. The World Bank cut its projections for Uruguay to 1.6% in 2026 and 1.7% in 2027, and private analysts have consolidated similar downgrades. Oddone dismissed talk of stagnation and reaffirmed the fiscal course, but the succession of downward revisions — including the acknowledgment that 2025 grew "almost entirely on carryover" and that 2026 started "at zero-zero" — erodes the credibility of the figures presented to Parliament. The Autonomous Fiscal Council has technical grounds for its warning.

Fiscal policy is the other open front. The Rendición de Cuentas envisages additional spending financed by unspent funds from various agencies in 2025, with no new tax revenues — something the MEF frames as fiscal discipline but that the opposition — the Coalición Republicana — refuses to endorse, forcing the government to consider an "alternative law" to implement changes in social allocations should the budget text fail to advance. The fiscal deficit closed 2025 at 4.1% of GDP, in line with projections, but the legacy inherited from the previous administration was 4.7% of GDP, leaving little room to maneuver. In parallel, minimum pensions from BPS, the Caja Policial, and the Caja Militar will receive a 2.5% increase following an agreement with the MEF — a modest adjustment in real terms that reflects the current fiscal tightness.

On the external front, Oddone made no secret of the fact that the international environment is "challenging and uncertain." The minister warned of the potential "negative shock" from energy prices linked to the conflict in the Middle East, and revealed that Washington is exerting daily pressure on Montevideo to reduce its trade ties with China — this in a context in which President Orsi has just deepened the bilateral partnership with Beijing. Uruguay is navigating a geopolitical tension with diplomatic dexterity that could carry real economic consequences. The MEF is working in parallel on a competitiveness bill — whose drafting included consultations with Argentine economist Frederic Sturzenegger — and on reforms to the investment regime, signals that the government recognizes that exchange rate and relative-cost variables remain a structural problem: the weak dollar continues to squeeze exporters, particularly agriculture, whose representative chamber, the ARU, has gone so far as to describe the situation as being "at the limit."

One data point that cuts against the generalized pessimism is inflation: Uruguay registered its lowest annual rate in 70 years, preserving household purchasing power and explaining why disposable income after fixed expenses has stopped falling after seven months of deterioration. The Central Bank, for its part, presented a preliminary bill to create an open finance system and continues to advance its agenda of reducing dollar usage in the economy — so-called peso-ization — while the Financial Stability Committee stated that the banking system "is well prepared to absorb hypothetical adverse scenarios." Uruguay remains the lowest sovereign-risk country in Latin America according to leading market indicators, ranked among the best-positioned in the region by Fitch Ratings, though that distinction coexists with a perceptible deterioration in business confidence and in citizens' perception of the economic situation.

What will set the tone in the coming months is the parliamentary outcome of the Rendición de Cuentas. If the government fails to secure opposition votes, it will have to resort to alternative legislation to implement its social policy priorities, generating political noise without resolving the underlying issue: how to accelerate private investment in an environment of an expensive exchange rate, competitive pressure, and uncertain global demand. The materialization of the green hydrogen, data center, and forestry-pulp projects is the variable that could most move the needle on potential growth — but also the most uncertain in the near term. International markets and rating agencies are watching closely to see whether the Orsi government can convert the institutional and macroeconomic stability it inherited — and has preserved — into a genuine acceleration of productive activity.