Weekly Report - 31 March 2011 (WR-11-13)

URUGUAY | Back to normal. The economy grew by 8.5% in 2010, according to the central bank, after posting 6.5% year-on-year growth in the final quarter of the year. Uruguay returned to the pace of growth of 8.6% in 2008, having registered 2.9% GDP growth in 2009 in the wake of the global economic slowdown. The average rate of growth between 2004 and 2008 was a hugely impressive 7%. The main driver of growth in 2010 was domestic demand, which expanded by 10.8% on the previous year.
The biggest challenge is likely to be posed by inflation, due to high food prices and climbing crude prices. Inflation reached 6.9% in 2010, and has already hit 2.2% for the first two months of 2011, according to the national statistics institute (INE), leaving the target of between 4% and 6% for annual inflation looking ambitious. The managing director of the IMF, Dominique Strauss-Kahn, warned during a visit in early March that the economy was running the risk of overheating, although he was full of praise for the government's achievements.

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