A Dimmer Outlook for Uruguay’s Economic Expansion
The World Bank has revised its economic forecast for Uruguay, projecting a more subdued trajectory over the next two years. In line with recent updates from the International Monetary Fund (IMF), the World Bank’s latest economic outlook highlights growing concern over the Uruguayan growth rate due to external and domestic challenges.
In its most recent update to the Global Economic Prospects report, released Tuesday, the World Bank adjusted Uruguay’s expected gross domestic product (GDP) growth downward for 2025 and 2026. The new forecasts suggest that the country will grow by 2.3% in 2025 and then slow to 2.2% in 2026. These numbers represent a drop from the previously projected rate of 2.6% for both years, which was issued earlier in the year.
This downgrade aligns closely with the IMF’s latest assessment. As of April 23, 2025, the IMF reduced Uruguay’s 2025 growth projection from 3% to 2.8%. While slightly more optimistic than the World Bank’s forecast, the IMF’s move underscores the mounting headwinds facing the small but economically stable South American nation.
Regional Trends and Comparative Growth
The revision of the Uruguayan growth rate comes amid a wider reassessment of growth prospects across Latin America and the Caribbean. While Uruguay has long been viewed as one of the region’s most stable economies, it is not immune to the broader dynamics shaping global trade, consumption, and investment trends.
According to the World Bank, regional growth in Latin America is expected to reach just 2.1% in 2025. This figure, although modest, is buoyed by expectations of a strong rebound in Argentina, which is forecasted to grow by an impressive 5.5% in 2025 and 4.5% in 2026. This Argentine resurgence is primarily attributed to aggressive economic restructuring policies and stabilization measures undertaken in recent years.
In contrast, other large regional economies, including Brazil, Mexico, and Colombia, are expected to experience more tepid growth. Structural bottlenecks, high inflation, and fiscal pressures remain significant obstacles to sustained growth.
Domestic Sentiment and Analyst Reactions
The World Bank’s lower growth projections for Uruguay have fallen short of expectations held by domestic analysts. According to the most recent survey by the Central Bank of Uruguay (BCU), the average growth forecast for 2025 stood at 2.5%. This is higher than the World Bank’s 2.3% projection, indicating that local economists may have a more favorable view of the country’s internal fundamentals.
Nonetheless, some analysts have acknowledged that mounting external pressures—from global monetary tightening to trade volatility—may begin to weigh more heavily on Uruguay’s growth rate in the coming quarters.
An Uncertain Global and Regional Environment
The outlook for Uruguay, and indeed much of Latin America, is being shaped by a confluence of external uncertainties. The uneven global recovery from the COVID-19 pandemic and subsequent geopolitical disruptions are chief among these. While consumption drove growth across much of the region in 2024, countries like Argentina and Chile saw their economic performance hinge more heavily on external trade.
At the same time, output growth among Uruguay’s primary trading partners remained lackluster. The G7 economies, for instance, are projected to grow by only 1.2% in 2025, reflecting economic deceleration in the United States and continued stagnation in parts of Europe. Meanwhile, economic growth in China—a major importer of Latin American commodities—is expected to remain subdued, adding another layer of complexity for countries dependent on export-driven revenue.
These global factors are critical to understanding the recalibrated Uruguayan growth rate, as Uruguay’s economy is closely integrated with international markets through agriculture, energy exports, and financial services.
Trade Policy and Nearshoring Shifts
The World Bank’s report further emphasized that rising global trade policy uncertainty significantly shapes the economic prospects for Uruguay and its neighbors. The report notes that the trade policy uncertainty index has increased and remains persistently above pre-2015 levels.
Much of this uncertainty stems from protectionist policies and the evolution of global supply chains. Major economies such as the United States, the European Union, and China have either implemented or are considering new tariffs and non-tariff barriers, which could impact Uruguay’s export competitiveness.
Additionally, the nearshoring trend—where companies relocate their supply chains closer to their home markets—could realign trade and investment flows across the Western Hemisphere. While this could create new opportunities for countries like Mexico and Costa Rica, Uruguay might face challenges if multinational firms shift attention away from South America’s Southern Cone.
Weather, Infrastructure, and Other Risks
Beyond international concerns, Uruguay also faces domestic risks that could affect the Uruguayan growth rate. Agriculture remains a vital component of the nation’s economy, and adverse weather patterns, including prolonged droughts or floods, can disrupt production and exports.
Infrastructure limitations, particularly transport and logistics, could hinder growth if not addressed through targeted investment. Additionally, while Uruguay has a reputation for political stability and institutional strength, it must continue to modernize its regulatory framework and attract foreign direct investment (FDI) to maintain its competitiveness.
Policy Responses and Future Prospects
In response to these evolving challenges, Uruguayan policymakers will likely consider a range of measures to stimulate economic activity. These include reforms to improve labor market flexibility, public-private partnerships for infrastructure, and enhanced incentives for technology and innovation sectors.
The country’s renewable energy sector, one of the most advanced in Latin America, also presents an opportunity for sustainable long-term growth. By leveraging green energy assets and expanding digital services, Uruguay could strengthen its resilience against external shocks and secure a more favorable Uruguayan growth rate over the next decade.
Conclusion
Although Uruguay continues to enjoy relative economic and political stability, the revised forecasts from the World Bank and the IMF underscore a period of caution and recalibration. The downward revision of the Uruguayan growth rate for 2025 and 2026 reflects broader uncertainties in global markets, trade policy, and regional vulnerabilities.
Uruguay must adapt to a rapidly changing international landscape while reinforcing its domestic strengths. How well it navigates this transitional period will determine whether it can regain momentum and achieve higher, more inclusive growth in the years ahead.