Uruguay stands out in Latin America for being an egalitarian society and for its high income per capita, low level of inequality and poverty and the almost complete absence of extreme poverty. In relative terms, its middle class is the largest in America, and represents more than 60% of its population. Uruguay is positioned among the first places in the region in relation to various well-being indices, such as the Human Development Index, the Human Opportunity Index and the Economic Freedom Index. Institutional stability and low levels of corruption are reflected in the high level of public trust in government. According to the Human Opportunity Index constructed by the World Bank, Uruguay has managed to attain a high level of equal opportunities in terms of access to basic services such as education, running water, electricity and sanitation.
In July 2013, the World Bank classified Uruguay as a high-income country. By 2017, the Gross National Income per capita at purchasing power parity (PPP) amounted to US$21,870.
Since 2003, the Uruguayan economy has had positive economic growth rates, averaging 4,1% from 2003 to 2018. Uruguay’s economic growth has remained positive even in 2017 and 2018, in spite of recessions experienced by Argentina and Brazil, thus departing from previous patterns when growth was synchronized with that of its main neighbors. Prudent macroeconomic policies and a commitment to diversify its markets and products within the dominant agriculture and forestry sectors have increased the country’s ability to withstand regional shocks.
In order to reduce the dependency on its main trading partners, Uruguay diversified its export markets. In 2018, Brazil and Argentina, Uruguay’s traditional trading partners, only represented 12% and 5% respectively of the total merchandise exports. Nowadays, its main trading partners are China (26%) and the European Union (18%).
Two main characteristics —a solid social contract and economic openness— paved the way to poverty reduction and the promotion of shared prosperity that Uruguay successfully followed in the last decade.
According to official measures, moderate poverty went from 32.5% in 2006 to 8.1% in 2018, while extreme poverty has practically disappeared: it went down from 2.5% to 0.1% in the same period. In terms of equity, income levels among the poorest 40% of the Uruguayan population increased much faster than the average growth rate of income levels of the entire population. Nonetheless, there are significant differences: the proportion of the population below the (national) poverty line is still significantly higher in the North of the country; among children and youth (17.2% among children younger than 6, and 15% and 13.9% among the age groups 6 to 12 and 13 to 17, respectively); and, among the afro descendant population (17.4%).
Inclusive social policies have focused on expanding program coverage; according to the World Bank, around 87% of the population aged 65 or more is covered by the pension system. This is one of the highest coefficients in Latin America and the Caribbean alongside Argentina and Brazil.
The strong macroeconomic performance was also reflected in the labor market, with a historically low unemployment rate recorded in 2011 (6.3%). However, given the noticeable slowdown in economic growth, the unemployment rate increased to 7.9% in 2018.
Despite recent progress in Uruguay, several structural constraints to growth remain, in particular in the areas of infrastructure investment, integration into global value chains and education/skills performance, which may obstruct the progress towards sustainable development outcomes. The strong institutional performance in other areas, such as public trust in government, low corruption and a consensus-based political approach, together with a deep commitment to strengthening its institutional set-up, give the country a solid basis from which to continue renewing its social contract and put in place policies to address such constraints.
Uruguay maintains an adequate macroeconomic framework but in a much more complicated external environment.
For more data on Uruguay, visit the World Bank’s Open Data site.
For more data on Uruguay, visit the World Bank’s Open Data site.
Last Updated: Apr 09, 2019
