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Trade Body Urges Fiscal Rule For Uruguay

by Mike Godfrey, Tax-News.com, Washington

07 May 2010


The National Chamber of Commerce and Services (CNCS) of Uruguay is calling on the new government to introduce a fiscal rule, to be included in the five-year budget, to prevent public expenditure from growing at a faster rate than the economy.

A report published by the CNCS affirms that fiscal stimulus measures in the past year to mitigate the effects of the crisis are unsustainable and stresses the need to maintain macroeconomic stability especially with regard to inflation, the fiscal deficit and balance of payments equilibrium.

The report ascribes excessive regulations and growing state intervention as a destabilizing factor in the sustainability of growth; moreover the CNCS regrets that, despite good overall economic developments, Uruguay continues to occupy the last place in the world ranking with regard to competitiveness and ease of doing business.

In the last twelve months to September 2009, the fiscal deficit was at 2.1% of GDP compared to a deficit of 1.5% in 2008 and a balanced outcome at the end of 2007. Over two years, the primary surplus before interest payments fell by about four percentage points of GDP.

The CNCS nevertheless projects a growth in activity levels between 4% and 5% in 2010, grounds for optimism in the near-term. This growth rate, although high by historic standards, is lower than that recorded between 2004 and 2008, when the Uruguayan economy grew at an annual rate of almost 7% on average.

TAGS: tax | economics | Uruguay | fiscal policy | budget

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