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Saturday, April 1, 2023

three photos of the Uruguayan economy this year, according to CED

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Agriculture in critical condition due to drought

Last January was the driest in the last four decades. In addition to the negative consequences that this will have on the contribution to GDP of electricity generation, the CED report indicates that it will “strongly affect the activity of the agricultural sector.”

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“The effects will occur mainly throughout the first half of the year, with negative impacts on exports and the dynamics of domestic prices,” the document states. By 2023 they are expectedlow yields” in most crops, especially soybeans, as well as “difficulties” in livestock and dairy production, with an estimated impact of 1.7% of GDP.

External sector, investment and labor market: yellow light

According to the CED, an eventual recovery of the Chinese economy in the second semester of this year could imply a revival of external demand which in the last quarter of 2022 was left behind precisely due to the decrease in sales to the Asian giant due to its covid-cero policy, partially offset by higher placements in the region and the European Union.

The report also highlights three important factors: the new UPM 2 pulp mill, “which would boost exports from the second quarter”; he rebound in tourist activity and the exports of non-traditional servicessuch as those of the IT sector or professionals.

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For its part, the new UPM 2 plant will also boost the investment this year. “Uruguay would continue to be attractive for foreign investment, as demonstrated in the previous two years, in a context of relative decline in the region,” also highlighted the CED, which also expects the execution of a good part of the investment promoted by Comap. and the continued dynamism of the real estate sector.

As for the working market, another point in yellow, the document indicates that its cyclical recovery seems to be coming to an end. In addition, he warns that current occupancy levels could be the “new equilibrium.” “This “floor” is consistent with the improvements in terms of the formality and qualification of the employed. However, there are structural bottlenecks that operate as a “ceiling” for the creation of future jobs,” he points out.

The real wage will grow in 2023

One of the variables with the greatest projection among a large part of the analysts, and also in the CED, is the actual salary. The entity anticipates a strengthening your recovery this year, “consistent with a disinflationary process that will continue during the first semester.”

Regarding the latter, the text risks: “In fact, it is possible that inflation will be temporarily close to the ceiling of the BCU’s target range in the middle of the year.”

In fiscal terms, however, he warns that disinflation could put pressure on the spending pillar of the fiscal rule in 2023 and 2024.

Still, the private consumption It will also be boosted by the reduction in inflation, as a result of “the recovery of the purchasing power of wages, the improvement in household income, as well as eventual tax reductions.”

Source: Ambito

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