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Uruguay's budget deficit 4% of GDP, worst since 1989

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Staff Writer | February 13, 2017
Uruguay's budget deficit reached 4% of GDP during 2016, equivalent to $2.043bn, the worst performance since 1989, according to the government's stats office INE.
Danilo Astori
Economy in LatAm   The budget primary deficit in Uruguay stood at 0.7% of GDP
The previous year, 2015 ended with a budget deficit of 3.6% of GDP, which also set a record only comparable to 2002 (3.7%), when Uruguay underwent one of its most challenging financial meltdowns in decades.

The budget primary deficit which does not include foreign debt capital or interest payments stood at 0.7% of GDP, equivalent to $357.5 million. However Uruguay's Economy minister Danilo Astori said results were better than expected since “these percentages are below targets anticipated in the annual budget, that is a 4.3% and 0.9% of GDP deficits”.

To face the challenge of a slower economy in 2015 and 2016, in an adverse regional and global environment, the Uruguayan government applied a pro-cycle policy, but has decided that beginning 2017 it will try to bring budget numbers under control, basically the deficit down to 3% of GDP in the twelve months, and 2.5% by 2019 at the end of the current administration.

This is to be achieved by implementing this year a strong hike in income taxes ($375 million), an even greater boost in public utility rates, which in Uruguay are government monopolies, and that during recent years have had a disastrous performance, plus supposedly a significant cut or delay in outlays.