MONTEVIDEO – Uruguay’s economy will grow 2.6 percent in 2018, led by investment and exports, and completion of a third cellulose processing plant in the country will be a key factor in this growth, BBVA Research Argentina chief economist Gloria Sorensen said Thursday.
Finland’s UPM is expected to move ahead with construction of a new cellulose plant in Uruguay, the second built by the company and the third in the South American country.
The plant, Sorensen said, will be “much bigger” than the two older facilities and “would add more than one percentage point to the economy’s growth.”
Uruguay’s gross domestic product (GDP) is expected to expand 1.3 percent this year as a result of improving confidence at the end of 2016 along with a strengthening currency, low inflation and improved purchasing power, Sorensen said.
“We expect this trend to continue the rest of the year with a relative improvement of real wages and expanding credit leading to a 1.3 percent GDP increase,” the BBVA economist said.
Although Uruguay follows the economic cycle in Latin America, the country “has relatively detached itself” from the region, which allows it to achieve positive growth amid regional downturns.
“The year 2016 was relatively volatile for Uruguay, with many changes in expectations, currency depreciation followed by appreciation and negative economic growth numbers that turned around for 1.2 percent growth at the end of 2016,” Sorensen said.
A key component of growth in 2016 was the power industry, which had a surprisingly good performance, the economist said.
A budget deficit equivalent to 3.9 percent of GDP, or a 0.50 percent increase from the previous year, was a source of concern in 2016, Sorensen said, adding that the expansion of health care to new groups of retirees was behind the figures.