Uruguay stands out in Latin America for being an egalitarian society, with high per capita income and low levels of poverty and inequality. In relative terms, its middle class is the largest in Latin America and the Caribbean and accounts for more than 60 percent of the population.
Following the 2002 crisis, sound macroeconomic management and favorable external conditions supported a prolonged period of economic expansion. However, growth has slowed since 2015, amid normalizing commodity prices, the health crisis triggered by the COVID-19 pandemic, and climate shocks, such as the severe drought that affected the country between October 2022 and August 2023. Despite these challenges, Uruguay maintained prudent fiscal management anchored in its fiscal rule and continues to have the lowest sovereign spreads in the region.
In 2023, the economy grew by 0.7 percent, largely reflecting the drought-induced decline in agricultural production. In 2024, the economy rebounded, expanding by 3.1 percent, driven by exports and private consumption, supported by improvements in the labor market and inflation remaining within the Central Bank of Uruguay’s target range.
Despite its economic and social stability, structural constraints continue to hinder the country’s ability to close key development gaps. An estimated 6 percent of the population lives in poverty, based on the international poverty line of $6.85 per person per day (2017 PPP). However, poverty rates are approximately twice as high among children, adolescents, and the Afro-descendant population. Income inequality has remained broadly unchanged in recent years, with the Gini Index remaining at about 40 points. Although this is among the lowest in Latin America, it remains high compared to countries outside the region.
Comparatively low educational outcomes given the country’s income level, limited global integration, and vulnerability to climate shocks are among Uruguay’s most pressing structural challenges.
Uruguay has emerged as a regional leader in the development of innovative financial instruments to address climate change. A key milestone in this agenda is the approval of the first World Bank loan whose financing conditions are linked to the achievement of ambitious climate goals. Under this operation, Uruguay could reduce its interest payments by up to US$12.5 million if it achieves a verifiable reduction in the intensity of methane emissions from the livestock sector.
Last Updated: Apr 23, 2025
