Economic growth decelerates in the third quarter of 2025

GDP expands at slowest rate since early 2024: Uruguay's GDP increased 1.2% on a year-on-year basis in Q3, following 2.3% growth in the prior quarter. Q3's reading was the weakest since Q1 2024, and marked the second consecutive deceleration. On a seasonally adjusted quarter-on-quarter basis, economic output contracted 0.2% in Q3, following a 0.4% expansion in the prior quarter.

Lower inventories drag on GDP growth: Compared with the previous quarter's data, the reading for private consumption worsened in Q3 (+2.1% on a year-on-year basis vs +2.4% in Q2). In contrast, readings picked up for government consumption (+1.4% vs -0.7% in Q2), fixed investment (+1.3% vs -1.9% in Q2), exports of goods and services (+5.2% vs +0.1% in Q2) and imports of goods and services (+3.0% vs -0.7% in Q2). The slowdown in Q3 year-on-year GDP growth was largely due to declining inventories, especially grains. Trade offered little help, with net exports barely contributing to economic growth, as strong exports of soybeans and rice were largely offset by higher import growth. The economy instead leaned on domestic demand. Fixed investment appears to have benefited from interest-rate cuts, while lower inflation and a falling unemployment rate compared to the prior quarter kept consumer spending growth above the 10-year average.

2026 GDP growth to undershoot 2025 average: In the last quarter of 2025, GDP growth is expected to pick up from Q3 levels on lower inflation and additional rate cuts. Looking to 2026, our panelists have recently downgraded their 2026 GDP growth projections. As a result, economic growth in 2026 is expected to hit a three-year low; temporary tailwinds are fading, particularly the post-drought rebound in agriculture and the opening of the UPM pulp mill.

Panelist insight: Commenting on the outlook, Diego Ciongo and Soledad Castagna, analysts at Itaú Unibanco, stated: “Our GDP growth forecast for 2025 stands at 2.3%, but now with downside risks due to the contraction in 3Q25 and the downward revision of the seasonally adjusted growth figures for 1Q25.”

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