Uruguay’s economy shrank 2.5% in the second quarter of 2023 compared to the same period of the previous year, mainly affected by a historic drought, the Central Bank of Uruguay (BCU) reported.
In seasonally adjusted terms, economic activity decreased 1.4% compared to the first quarter of 2023, the institution said in its latest national report.
“In the contraction of the Gross Domestic Product (GDP) in year-over-year terms, the negative impact of activity in the sectors of agriculture, fishing, and mining (-27.4%), as well as electricity, gas, and water (-11.8%), where impacts of drought were seen, meant that the increase in domestic demand did not compensate for the reduction in external demand,” the BCU report explained.
“There was a decrease of 6.3% in the physical volume of exports, while imports increased 7.5%. With regard to imports of services, there was an expansion in tourism spending abroad, associated with greater departures of tourists to Argentina,” the BCU report added.
“This contraction of Uruguayan GDP is worse than consensus expectations and what was anticipated by the Central Bank, due to the greater impact of the drought,” said economist Aldo Lema, director of SK-Godelius, on the social network X, formerly Twitter.
In June, the government of Luis Lacalle Pou revised downward its forecast for the expansion of the economy for 2023, from 2% to 1.3%. Uruguay this year recorded the worst water deficit since records began more than seven decades ago.
