Government's growth math fails its own fiscal watchdog's reality check.

The question dominating Uruguay's economic debate today is not whether the country is growing, but whether it will grow enough to sustain the promises its own government just committed to in the Rendición de Cuentas (Budget Accountability Report), and the answer from its main fiscal oversight body is uncomfortable: probably not.

The Consejo Fiscal Autónomo warned before Parliament that the projections from the Ministerio de Economía y Finanzas included in the Rendición de Cuentas contain an "overestimation" that could compromise the coherence of the Frente Amplio government's fiscal framework. The warning comes at a particularly delicate moment: Minister Gabriel Oddone had already publicly acknowledged that there is "a fairly high probability" that the growth projection for 2026 will need to be revised downward, and that projection errors are "something routine." That latter statement, delivered as a defense, was received by the opposition and private analysts as an implicit confirmation of the problem.

The numbers back up the skepticism. The Uruguayan economy grew just 1.8% in 2025, below both official forecasts and the IMF's, and closed the year with activity essentially stagnant in the final quarter. The first quarter of 2026 showed a modest recovery of between 0.8% and 0.9% versus the prior period, driven by consumption and exports, but agriculture and construction contracted, and the central bank is already talking about "less dynamism" for the year as a whole. The World Bank cut its projections for Uruguay to 1.6% in 2026 and 1.7% in 2027, well below the pace the government needs to execute its spending agenda. Against that backdrop, the Rendición de Cuentas — which contemplates additional spending requests of roughly USD 1 billion — so far lacks the necessary parliamentary support: the Coalición Republicana refused to vote for the bill, and Oddone, true to form, stated that he "will not give up on negotiating."

Layered on top of that insufficient-growth scenario is a second front of tension: pension system reform. The government has confirmed it will push for changes to the AFAP regime, but the word "nationalization" triggered an immediate backlash. Oddone dismissed the term as an "exaggeration" and guaranteed there would be "no confiscation," while the PIT-CNT — which held a direct meeting with the minister on the matter — received the message cautiously. Opposition figure Pablo Abdala was more blunt: "agreements are meant to be honored," he warned, in implicit reference to the commitment not to alter the individual capitalization system agreed upon during the 2023 pension reform. The AFAPs, for their part, praised the "progress achieved" in the negotiations, a signal that the process is underway even if far from closed.

On the energy front, a story with broader regional implications is emerging today. Crude from Vaca Muerta is consolidating its role as a key supply source for ANCAP, the state-owned Uruguayan refinery, gradually displacing dependence on more expensive grades against a backdrop of volatile international prices. In parallel, Uruguayan diesel is behaving atypically for the region: unlike its neighbors, Uruguay has not fully passed through to the consumer the escalation of the Middle East conflict, which produces both a benefit for the domestic economy and a political strain on the state company. Minister Oddone explicitly referred to a "negative shock" stemming from energy prices, placing the regional conflict among the three external shocks currently weighing on the country's economic performance, alongside global trade turbulence generated by Washington's tariff policies and China's slowdown.

Faced with that landscape, the government is betting on a set of large-scale private investments to move GDP: green hydrogen, data centers, and a new pulp mill are the projects on which the economic team is pinning its growth projections. Deputy Minister Martín Vallcorba noted that projects from several global tech firms beyond Google are under evaluation, and Knowledge Economy exports posted record growth in 2025, one of the few structurally encouraging data points in the current cycle. At the same time, the MEF doubled its issuance of peso-denominated Treasury Notes after receiving bids for nearly 9.7 billion pesos — awarding just over 4.4 billion — at rates below 7%, a sign that local markets retain appetite for sovereign debt in local currency, reinforcing the gradual de-dollarization process being driven by the central bank.

The wheat harvest, which could contribute some USD 3.9 billion to the economy on the back of a record crop, and inflation's decline to its lowest year-on-year level in 70 years, round out a picture that combines genuine macroeconomic strengths with insufficient dynamism to satisfy government expectations and stem the deterioration in public perception: according to consultancy Cifra, the economic climate "has been deteriorating," and nearly half of Uruguayans rate the economic situation as poor.

What comes next will determine whether Uruguay can translate its stability into acceleration. The coming weeks will be crucial for three simultaneous processes: the parliamentary negotiations around the Rendición de Cuentas, the definition of the scope of the AFAP reforms — where the government is simultaneously facing union pressure and resistance from the private financial sector — and the impact of the Middle East conflict on energy prices and the exchange rate. The dollar has already posted its biggest weekly gain in six years as a result of that conflict, partially easing the FX lag that has been eroding exporter competitiveness, but also injecting a new variable of uncertainty into an economy still seeking, with more patience than speed, a path toward robust growth.

**ANCAP (state-owned company, no international listing)** — Uruguay's state refinery is deepening its reliance on Vaca Muerta crude as a supply source, reorienting its supply chain toward Argentina at the expense of costlier providers, in a context of margin pressure driven by diesel pricing policy. The decision has direct implications for YPF (NYSE: YPF), whose production in the Neuquén basin is finding in Uruguay a growing and stable export market.

**Uruguayan AFAPs (private sector, no direct listing)** — The pension fund administrators issued a moderately positive signal by praising the "progress achieved" in negotiations with the Executive over reform of the pension regime, though the process remains open with no definition on the scope of state intervention in the management of individual savings. The outcome of that negotiation will directly affect international asset managers with exposure to Uruguayan debt and equity through the portfolios managed by the system.