He Central Bank of Uruguay (BCU) warned about the potential risks facing the Uruguayan financial system, among those who identified the blows of the war between Israel and Hamas, the unstable situation in Argentina in full transition of government and plebiscites that the government can face next year.
In this way, the BCU focused on the international and regional context, but also on the domestic one, by putting the magnifying glass on the possible impact that may arise from the plebiscites on the social security reform, that drives the PIT-CNT, and for the bill of debt restructuring to natural persons, endorsed by Town meeting.
The analysis was carried out by the Financial Stability Committee, that make up the BCU, he Ministry of Economy and Finance (MEF) and the Bank Savings Protection Corporation (Copab), which warned that “uncertainty around the international macro financial situation persists.”
The report indicated that “in USA, market volatility bonuses has increased and interest rates of these ten-year instruments are at high values,” while maintaining that “the projected growth rates for the chinese economy for him IMF for 2023 and 2024 have been corrected downwards compared to April.”
Thus, he warned that “the risk of a further deterioration in international financial conditions remains, with greater risk aversion on the part of investors, less favorable conditions of access to financing, greater volatility and reduction in product worldwide.” ”.
The impact of war
To this he added that “the geopolitical risk has increased since the last report as a result of the conflict between Israel and Hamas, that intensifies the trend towards a more fragmented world, a trend that had already been enhanced by the invasion of Russia to Ukraine and the tensions between China and Taiwan.”
The Committee indicated that the potential extension of the conflict of Israel to other territories in the East could have “significant effects on the price of Petroleum, highlighting the strategic importance of the Strait of Hormuz (Iran coast), through which approximately 20% of global oil circulates.”
The situation in Argentina, under the magnifying glass
In moments where Argentina is under a new political sign, after the electoral victory of Javier Milei, he BCU indicated that “the inflation “It remains high and international reserves remain at low levels, within the framework of the transition to the new government.”
In turn, he maintained that growth projections have been reduced for 2023 and 2024 in that country, while in Brazil “Challenges remain in terms of consolidating fiscal sustainability,” which is why he concluded that “risks persist at the regional level in the processes of adjustment of imbalances.”
The plebiscites
At the local level, the study identified risks linked to the eventual approval of the plebiscites of Town meeting and the PIT-CNT, that would have “direct effects on the financial system, potentially affecting its development and structure.”
When referring to possible popular consultations on the social security reform and the debt restructuring, The committee assured that “it would also have indirect effects for the financial system through its impact on fiscal matters.”
Finally, the report clarified that “the domestic financial system is stable” and highlighted that “it would be capable of processing the effects of their eventual materialization.”
Delving into this position, he argued that “the very capabilities of the financial system, among which its levels of solvency and liquidity stand out, determine that it is in a position to contribute to the adequate management of risks, thus facilitating current performance.” and future of the economy.”
Source: Ambito
