The Superintendency of Financial Services reported that the economy was once again in a recession quadrant during 2023.
Through its Superintendency of Financial Services (SSF), the Central Bank of Uruguay (BCU) resolved to establish a pause in the increases in funds through the Countercyclical Capital Buffer (CCC) and maintain the λ percentage at 0.75% as of January 1, 2025.
The state body observed that the local economy returned to a recession quadrant last year, and that during the last quarter of 2022 and the first quarter of 2023, the most relevant economic sectors felt the “combined impact” of the shocks of commodity prices down added to the droughtas well as the exchange difference with Argentinawhich had a negative impact on the level of activity.
Likewise, it was pointed out through a statement that in USA core inflation persists that is determined by “robust demand”, but it began to subside due to the rapid increase in interest rates by the Federal Reserve (Fed). These measures increase the probabilities of lower growth in that country, and possibly the maintenance of high interest rates will be prolonged over time.
The Fed’s actions may imply greater credit and market risks, both for developed and emerging countries in the medium term, and the increase in these risks is amplified in an economy with a partially dollarized credit market.
The increase in credit in dollars and pesos accompanies the economic recovery
On the other hand, it is indicated that the increase in credit in dollars and pesos is accompanying the recovery of the post-pandemic economy, and at a rate greater than the evolution of the Gross Domestic Product (GDP).
Finally, the BCU explains that “in the coming semesters, the evolution of economic activity, credit, risks, and the international financial context must be considered for their evolution, as indicated by the CCC methodology.” and that “according to the analysis, it will be determined whether the increase in the countercyclical capital requirement will be resumed in the coming periods.”
Source: Ambito
