Uruguay's Economy Contracts for First Time Since 2003

  • GDP contracted 0.1 percent annually in the second quarter
  • Drop in public sector investment, consumption weighed on GDP

Uruguay’s economy shrank for the first time in more than a decade during the second quarter due to a slump in investment and retail sales.

Gross domestic product contracted 0.1 percent in the second quarter from a year earlier compared with a median forecast of 1.9 percent growth by four economists surveyed by Bloomberg.

Public sector investment tumbled 18.3 percent year-on-year in the second quarter due to a drop in construction activity and equipment purchases, while consumption fell 0.7 percent, according to a central bank report. A drought that reduced electricity output by almost 59 percent also weighed on the economy, the bank said.

Uruguay’s economy has slowed amid a recession in trading partner Brazil and a drop in the prices of its agricultural exports. The government now sees annual growth of about 2.7 percent between 2015 and 2019, down from 5 percent a year in the previous decade.

"We are expecting growth of between 2 percent and 2.5 percent" in 2015, Finance Minister Danilo Astori told reporters Tuesday in a video clip published on the Presidency’s home page.

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