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Uruguay forecasts inflation above target at 8.4 pct in 2015
September 1, 2015 / 4:21 PM / 2 years ago

Uruguay forecasts inflation above target at 8.4 pct in 2015

MONTEVIDEO, Sept 1 (Reuters) - Inflation in Uruguay will hit 8.4 percent this year and will not slow to 5 percent until 2019, three years later than hoped for by President Tabare Vazquez, a budget blueprint for the next five years showed on Tuesday.

A jump in inflation - the official target is 3 percent to 7 percent - is a growing headache for Uruguay’s policymakers who have already imposed a two-month freeze on the cost of some 1,600 goods. Inflation was 9.02 percent in July on an annualized basis.

A draft budget bill presented to Congress on Monday night forecast economic growth of 2.5 percent in 2015 and next year, accelerating to 3 percent in 2018 and 2019.

“Inflationary pressures will begin to ease as a result of the expected slowdown in domestic demand and policymaking that will ensure monetary and fiscal instruments work in synchrony,” the draft bill stated.

The Uruguayan peso has weakened 17 percent against the dollar this year, stoking inflationary pressures and dashing Vazquez’s hopes that the rate of inflation would ease to 5 percent next year.

Uruguay, a cattle-farming country long dubbed the “Switzerland of South America” for its offshore banking, has had one of the fastest expanding economies in Latin America over the past decade.

But growth has showed sharply as neighboring economic powerhouses Brazil and Argentina either slide or teeter on the brink of recession. Last month, Uruguay unveiled a $12 billion spending plan on energy, transport and housing infrastructure to create jobs and shore up the economy.

Exports would strengthen from 2017, according to the draft budget bill. (Reporting by Malena Castaldi; Writing by Richard Lough; Editing by Paul Simao)

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