Uruguay distinguishes itself in Latin America for its egalitarian society, boasting a high income per capita, low levels of inequality and poverty, and a notable absence of extreme poverty. With a middle class representing over 60% of its population, the country's relative prosperity is evident. Despite a recession induced by the COVID-19 pandemic in 2020, Uruguay's robust economic growth has endured for two decades, with prudent fiscal management leading to the lowest sovereign spreads in the region.

In 2022, the country experienced a 4.9% growth in its GDP, demonstrating resilience after the pandemic. However, a historic drought is anticipated to contribute to a slowdown in economic expansion, with a projected growth of 1.5% in 2023. Although the percentage of households living in poverty currently stands at 6.4%, measured by the international poverty line of US$6.85 per capita per day, this figure is 1.3% points higher than pre-pandemic levels, indicating some impact on social indicators.

Despite Uruguay's economic and social stability, there remain significant disparities rooted in structural limitations. Challenges include education disparities, limited global trade integration, an inadequately competitive environment, underdeveloped financial markets, and persistently high inflation. The country's vulnerability to climate change was highlighted by a record drought affecting agricultural production and water supply in the capital, emphasizing the reliance on natural capital.

Uruguay's commitment to addressing climate challenges is evident in its pioneering financial instruments, such as the sustainability-linked bond issued in 2022, linking concessional financial conditions to overaccomplishing selected Nationally Determined Contribution (NDC) targets. The country is actively working to extend innovative climate-finance arrangements to multilateral financial institutions.

Source: World Bank, Uruguay Country Overview