Uruguay Central Bank Statement

Author: | Published: 5 Sep 2017
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Uruguay has showed an outstanding macroeconomic performance (averaging 4.4% annual GDP growth over the last 10 years and 1.5 % in 2016), even though the regional environment has remained uncertain in the last years.

Uruguay is experiencing its longest period of non-interrupted growth, which is supported by a strong institutional environment and a healthy financial stability framework. This performance allows a major fall in poverty and a generalised improvement in our human development indicators. According to United Nations' Economic Commission for Latin America and the Caribbean (ECLAC), Uruguay was first in poverty reduction among Latin American countries between 2010 and 2016.

After the shift in 2013 to manage monetary aggregates as the intermediate target, the Bank has successfully complied with the scheduled reduction in money growth causing a key point to download inflation to enter the target zone. Inflation had a descending path during 2016, reaching 8.1% by the end of the year and the 3%-7% target range by march of 2017. One of the main concerns for the Central Bank is to keep working in an effort to keep inflation expectations anchored.

The result of this successful policy has been reflected in the improvement of sovereign credit ratings during 2016 and 2017. A prudent management of fiscal policy provoked the decrease in the net public debt to GDP ratio from 51% in 2005 to 30% in 2016. This achievement has been enhanced by an increase in its average maturity and a decrease in the foreign currency denominated share from almost 100% in 2002 to 16% (this ratio corresponds to net public debt) by 2016.

Systemic risk remains low in the Uruguayan financial system due to the large reduction of liabilities and deposits dollarization that followed the 2002 financial crisis, the notable decline in currency mismatches – both in the public and the private sector balance sheets – and the continuing efforts to strengthen the financial safety net. To make a joint systemic risk assessment of the financial system, a Financial Stability Committee started to operate in 2011.

Total banking credit to the private sector was nearly 30% of GDP in 2016, while short-term liquidity exceeded 54% with an average Capital Adequacy Ratio of over 13%.

The government and the Bank are taking the challenge of improving financial inclusion and financial markets development, not only improving the access of low income households to the financial sector but also enhancing financial literacy in order to help domestic agents' financial decision-making process.




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