He Macroeconomic Coordination Committee defined that the target range for inflation will continue between 3% and 6% during the last year of the government, after meeting with the objective of taking stock of the year and outlining the economic course for Uruguay during 2024.
2023 was a year with achievements and challenges in macroeconomic terms, which were duly analyzed by the Macroeconomic Coordination Committee at the close of the last week of December. The central points of the meeting that had as participants the representatives of the Ministry of Economy and Finance (MEF) and those of the Central Bank of Uruguay (BCU) were the evolution of inflation and the economic situation in general, with special focus on the performance of the activity.
In that sense, and as reported by the portfolio led by Azucena Arbeleche Through an official statement, “economic activity is expected to regain dynamism in the next two years, led by the recovery of exports and household consumption.” This, after a 2023 in which the activity reflected the negative impacts of the drought, the closure of the refinery National Administration of Fuels, Alcohol and Portland (Ancap)the deficit tourist balance and the completion of the construction works UPM II.
Anticipating a more positive 2024 in these terms, “the projections of the activity level “They remain in line with the latest published ones.”
Inflation and deficit, two central issues
Regarding the fiscal situation, the Macroeconomic Coordination Committee maintained the expectation of closing 2023 in line with the three goals of the tax rule presented in the Accountability from last year. This moderately optimistic forecast is maintained even though collection was visibly impacted by lower activity due to the drought and by the “lower inflation that has a negative impact on government income.”
Although it was not mentioned in the official report, the diversion of consumption towards Argentina Due to the exchange difference, it was also a negative factor for collection, especially in terms of indirect taxes such as VAT and the Imesi.
Refering to inflation, The BCU presented the evolution of this indicator, as well as the expectations of the different economic agents, the composition of inflation and the projections for the entire monetary policy horizon.
As reported by the Committee, “inflation is expected to close 2023 at around 5%. At the end of 2025, the current horizon of the monetary politics, The inflation projection is 5.3%, while, at the end of 2024, the projected inflation is 4.9%, with the expectation that it will remain in the range throughout the period.”
This was valued positively by the assembled work team, made up of Arbeleche; the president and vice president of the BCU, Diego Labat and Washington Ribeiro; the director of the Debt Management Unit, Herman Kamil; the director of Economic Policy of the MEF, Marcela Bensión; the macroeconomic advisor of the MEF, Carolina Steneri; and the manager of Economic Policy and Markets of the BCU, Adolfo Sarmiento.
“Inflation expectations have shown a slow but adequate evolutionconverging towards the target range”, they considered, so the final decision was to maintain the target range for inflation with a center at 4.5% and a margin of +/- 1.5%, so it remained situated—as now—between 3% and 6%.
Source: Ambito
