Drought strikes: Uruguay economy shrinks by 2.5% in Year-on-Year analysis

The Central Bank of Uruguay has unveiled concerning data the country’s economy, revealing a 2.5% year-on-year decline in the country’s Gross Domestic Product (GDP) for the second semester of 2023. The figures, released on Thursday (09/14), shed light on the adverse effects of the drought on Uruguay’s economic landscape.

While the second quarter of the year saw a 2.5% growth compared to the same period in 2022, there was a marked contraction of 1.4% compared to the first quarter. This downturn was notably evident in key sectors, including a staggering 27.4% drop in agricultural activity, an 11.8% decrease in electric energy, gas, and water, and a 6.6% decline in construction.

The Central Bank of Uruguay highlighted in its executive summary, “From the production approach, the fall in the agricultural, fishing, mining, and energy activities stands out, where the impacts of the drought were seen, partially offset by the positive performance of transport and storage activities, information and communications, professional activities, and leasing.”

On the demand side, there was a conspicuous “external decrease that was not offset by the increase in domestic demand,” despite a rise in household final consumption expenditure.

The report from the Central Bank noted, “External demand presented a reduction in the physical volume of exports of 6.3%, while imports increased 7.5%, resulting in a contraction of external demand in terms of physical volume compared to the same quarter of the previous year.”

In terms of seasonally adjusted figures, economic activity saw a 1.4% contraction compared to the first quarter of 2023.

The chart below compares the import and export movement of containers at the capital of Uruguay between Jan 2019 and July 2023. The data is from the DataLiner maritime intelligence service.

Montevideo Container Movement | Jan 2019 – Jul 2023 | TEU

Source: DataLiner (click here to request a demo)

The consulting firm Exante commented on the situation via X (formerly known as Twitter), stating, ”Q2 (second quarter) GDP performance was worse than expected, but Q1 (first quarter) figures were also revised upward. On a year-over-year measurement, the decline reported by BCU is 2.5%. The drought and the end of the works associated with the UPM 2 project were key determinants of the drop. However, several services items performed poorly in the last quarter.”

Source: MercoPress

Click on the following link to read the original story: https://en.mercopress.com/2023/09/15/drought-strikes-uruguay-s-economy-shrinks-by-2.5-in-year-on-year-analysis

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