Uruguay in focus A quarterly bulletin issued by the Debt Management Unit of the Ministry of Economy and Finance October 2019 Results of the Presidential and 1) REAL SECTOR electricity (that more than offset lower legislative elections on October 27th: exports of cattle, leather and rice). ruling Broad Front party and The Uruguayan GDP increased 0.1% opposition National Party advance to in 2019Q2 YoY; in seasonally Finally, imports decreased 0.3% YoY in the run-off in end-November; no adjusted terms, it grew 0.3% with the second quarter, chiefly as a result of majority in Congress from either party. respect to the first quarter. lower goods imports, and within these, machinery and equipment. General elections were held on October In the second quarter of 2019, the 27th, and candidates Mr. Daniel Martínez economy expanded a slight 0.1% in On the other hand, imports of services (ruling Broad Front) and Mr. Luis comparison to the same period last grew mainly because of an increase in Lacalle Pou (National Party) will face in year, while it grew 0.3% in seasonally outbound turism, yet they could not a run-off scheduled for November 24th. adjusted terms with respect to the first offset the afformentioned decline in According to latest official numbers, the quarter. imports of goods. incumbent party got 39.2% of total votes, National Party 28.6%, followed by Demand Components Production Sectors Colorado Party and Cabildo Abierto Party with 12.3% and 10.8% of the From the expenditure side, the Regarding the performance of the ballot, respectively. domestic demand decreased in 2019Q2 activity sectors in the second quarter — YoY due to a reduction in capital in YoY terms—, it stands out the With these results, no party will hold a formation, while final consumption increase in transport, storage and majority in either the House of Senators remained unchanged. In contrast, net communications and to a lesser extent, nor the House of Representatives. Over external demand showed a better in primary activities and electricty, gas the last 15 years, the governing Broad result. and water supply. In contrast, Front held the majority in both commerce, restaurants and hotels, chambers of Congress. Final consumption was steady in manufacturing industries and comparison to the second quarter of construction showed a negative growth. Macroeconomic Highlights last year, with a mild drop in household consumption (-0.1%) and an expansion The Transport, Storage and The economy showed a slight of the government´s of 0.4%. Communications sector increased its increase of 0.1% YoY in the second value added by 5.5%, as a quarter of 2019, while growing 0.3% in Gross capital formation declined 5.8% consequence of the expansion of all SA terms over the previous quarter. YoY, owing both to a downdraft in gross these three activities. fixed capital formation and less The 12-month Non-Financial inventory accumulation. Regarding the The supply of electricity, gas and water public sector deficit was 2.1% of former, and from an institutional point of registered an expansion of 3.5% (YoY), GDP as of August, including the view, its reduction was due to a 15.9% on the back of higher generation and transfers to the public Social decline in public gross fixed investment distribution of electrical energy from Security Trust Fund. while the private sector´s contracted renewable sources, mostly 1%. hydroelectric. Uruguay continues steadfast “de- carbonization” of its economy, and Exports expanded 3.5% in 2019Q2 with The primary activities output grew 0.9% ranks first in LATAM in electricity respect to the same period last year, in 2019Q2 YoY, due to an improved generation based on wind and fully explained by an increase of goods soybean and corn harvesting —which photovoltaic sources. exports whereas exports of services fell enjoyed much better climate conditions due to less inbound tourism. The surge than an year ago—, as well as an For the updated Institutional in the former was owed to higher increase in wood supply and beef Presentation, please click here. exports of soybeans, beef and production. 1 The added value in the sector of 2) EXTERNAL SECTOR Concerning the former, the main commerce, restaurants and hotels CAB registered a surplus of 0.2% of negative impact arose from the drop in decreased 2.6% in real terms compared GDP in the year end in 2019Q2 inbound turism, mostly Argentinians, to the second quarter of 2018, as a and the evolution on relative prices with result of a lower dynamism in all three The Current Account of the Balance of this country. On the other hand, the rise type of activities. Payments posted a surplus of 0.2% of in import of services was determined by GDP in the twelve months through higher expenditures made by Regarding the manufacturing sector, it June-2019, on the back of a surplus in Uruguayans abroad. showed a negative performance of the trade balance of goods and services 1.9% in YoY real terms, explained by (5.7% of GDP) as well as in the The Primary Income balance posted lower activity in the oil refinery not fully Secondary Income (0.3%). This was approximately a USD 3.3 billion deficit, offset by an upward activity in the partially offset by a deficit in th Primary USD 152 million smaller than a year export branches. Among these, it Income category (of 5.8% of GDP). ago. The improvement was mostly highlights the manufacture of cellulose explained by accrued interests on pulp and the slughter plants production. Current Account Balance Central Bank Reserve Assets as well as (In % of GDP) in the gains obtained abroad from the Construction activity fell 4.7% in Trade Balance Primary Income private sector portfolio investments. 2019Q2 with respect to the same period Secondary Income CAB of the previous year, driven by a 8 Finally, the Secondary Income balance, slowdown in building construction in 4 which describes the net current Montevideo city. transfers, had a positive value of around 0 0.3% of GDP. Contribution to GDP Growth by Expenditure (On a quarterly basis) -4 Overall, the Financial Account registered a net outflow of USD 173 (in % of GDP) -8 6 2012 2013 2014 2015 2016 2017 2018 2019Q2 million in the year ended in 2019Q2 Source: Central Bank of Uruguay (including the Errors and Omissions 4 component). 2 The balance in the trade of goods improved USD 200 million —reaching 0 By end-August, international reserves of USD 2.7bn— due to both a better result the Central Bank of Uruguay (CBU) -2 in the general merchandise balance and totaled USD 14.7billion (26% of GDP). the goods under merchanting balance. 2014Q2 2014Q4 2015Q2 2015Q4 2016Q2 2016Q4 2017Q2 2017Q4 2018Q2 2018Q4 2019Q2 This level is well above the upper bound Gross Fixed Public Investment Net Exports of the IMF reserve adequacy Gross Fixed Private Investment Government Consumption Components of Goods´ Trade Balance benchmark (which takes into account Private Consumption GDP growth (Last 12 months change in %, except otherwise Source: Central Bank of Uruguay indicated) potential balance of payments drains, including short-term external liabilities). The nationwide unemployment rate Exports Exports excluding goods under merchanting Importantly, international assets stood at 9.1% in August, only 0.1pp Imports Goods Balance in % of GDP (RHS) remained largely stable over the last higher than a year ago. In the last 15 5 few years, with Reserves to GDP ratio twelve months, on average, the rate consistently surpassing 25% since was 8.7%. 10 4 2012. Unemployment and Employment Rate 5 (Average of last 12 months, in %) 3 0 Employment rate Unemployment rate -5 2 ago-15 nov-15 feb-16 may-16 ago-16 nov-16 feb-17 may-17 ago-17 nov-17 feb-18 may-18 ago-18 nov-18 feb-19 may-19 ago-19 may-15 60 8.8 2017Q2 2017Q4 2018Q2 2018Q4 2019Q2 Source: Central Bank of Uruguay 58 7.8 The Services balance posted a surplus 56 6.8 of USD 555 milion in the year ended in March 2019, despite having decreased 54 5.8 50% in comparison to the same period of last year. This obeyed both to Feb-16 Feb-17 Feb-18 Feb-19 Aug-16 Aug-17 Aug-18 Aug-19 Aug-15 Source: National Bureau of Statistics reduction of exports (7.8%) and an increase in imports (4.4%). 2 International Reserves governments, public enterprises and the Consolidated Public Sector Balance state-owned insurance bank (BSE). (In % of GDP) In USD billion In % of GDP (RHS) 20 35 Under this perimeter of fiscal Central Bank consolidation, assets and liabilities held Non-Financial Sector 30 Overall Balance 15 by the NFPS where the counterpart is 1 0 25 the Central Bank, are not netted out in 10 debt figures. For instance, capitalization -1 -2.1 20 -2 bonds issued in the past by the -0.7 5 Government to the Central Bank (in -3 15 -2.8 order to maintain the minimum capital -4 0 10 requirments established in its charter -5 law) are included in the NFPS gross 2015 2016 2017 2018 Aug-19 * (*) Last 12 months Source: Central Bank of Uruguay debt. Likewise, the CBU-bills held by Source: Ministry of Economy and Finance other public entities as well as their deposits in the Central Bank are Regarding debt figures, the 3) FISCAL INDICATORS included as part of the assets in the Consolidated Public Sector debt stood Non-Financial Public Sector deficit NFPS financial position. at 66.5% of GDP as of June 2019, while was 2.1% of GDP in the twelve the net debt printed at 32.8% of GDP.