Public Sector Management and Social Inclusion Development Policy Loan

closed

The development goal of the Public Sector Management and Social Inclusion Development Policy Loan (DPL) Program for Uruguay is to support the development and implementation of policies aimed at strengthening resilience to external shocks and improving growth opportunities, with a focus on poor and vulnerable groups. This DPL for US$260 million is to be implemented as a single operation with a Deferred Drawdown Option (DDO). Uruguay recorded a strong macro economic performance over the past nine years. Real gross domestic product (GDP) growth averaged more than 5 percent per year in the period the 2002 debt crisis. The year 2011 was the ninth consecutive year of GDP growth, marking one of the longest growth periods in the country's history. Prudent macroeconomic policies, improvements in structural areas and favorable external economic conditions, such as buoyant demand for its main export products and a booming regional economy, have contributed to the strong economic performance of Uruguay and helped protect the economy during the 2008/2009 crisis. Private consumption continues to be the main driver of the economy. As in previous years, with the exception of 2009, when GDP growth was driven by the external sector, private consumption was the main driver of economic growth. Private consumption grew by 7.6 percent in real terms in 2011, accounting for 6.1 percentage points of total growth. Gross domestic investment, fueled by still high levels of foreign direct investment (FDI) inflows (4.7 percent of GDP in 2011), grew by 7 percent and explained 1.4 percentage points of GDP growth. Similar to previous years, the contribution from the external sector was negative, reducing GDP growth by 2.1 percentage points.