Uruguay raises 2011 growth, inflation forecasts

MONTEVIDEO: Uruguay has raised its 2011 economic growth forecast to 6 percent and its inflation forecast to 7.8 percent, according to a government document published on Friday.

It previously expected growth of 4.5 percent and full-year 2011 inflation of 6 percent. But estimates have risen due to strong internal demand and high world food prices, the economy ministry said in a regular report to Congress.

"The economy will continue to face inflationary pressures coming from strong internal demand and high international food prices," the report said.

The small South American country registered inflation of 8.53 percent in the 12 months through May. Its gross domestic product expanded 8.5 percent last year and 6.8 percent in the first quarter versus the same 2010 period.

Private economists see 2011 inflation of 7.47 percent and economic growth of 6.38 percent, according to central bank polls conducted in June.

Uruguay's central bank raised its benchmark lending rate 50 basis points to 8.0 percent in June, citing the need to contain inflation.

In neighboring Paraguay, President Fernando Lugo told Congress on Friday that the country's economy will grow by 5 percent this year, up from the central bank's previous estimate of 4.5 percent.

Gross domestic product in Paraguay, the world's fourth- biggest soybean exporter, boomed 15 percent last year, thanks largely to high commodity prices.

The country's central bank sees 2011 inflation at 7.5 percent despite a recent spike in consumer prices. In the 12 months through May, inflation in Paraguay was 10.2 percent.

COPYRIGHT REUTERS, 2011