BCRP reduced GDP growth to 2.6% and private investment would now fall 0.5%

Due to the economic impact of the protests and the intense rains caused by Cyclone Yaku, the Central Reserve Bank of Peru (BCRP) revised downward its macroeconomic projections for 2023.

Thus, the monetary entity reduced from 2.9% to 2.6% the growth of the Gross Domestic Product (GDP) for the current year. This expected lower dynamism is based on the fact that in the first quarter economic activity would have a growth of 0%, while for the April-June period an expansion close to 3% is forecast.

“In January, the impact that we have felt from the protests has been almost 4% of GDP. We expected growth of around 3% and it has ended up falling by more than 1%. In February we expect that impact to be less and, more Well, in March there will be a greater impact in some regions affected by the weather situation that we are experiencing now,” explained Julio Velarde, president of the BCRP, during the presentation of the March 2023 Inflation Report.

The banker explained that, in February, economic growth would be between 0.4% and 0.5% due to the social upheaval, while Cyclone Yaku would affect March’s GDP by 1%.

For his part, the head of the Ministry of Economy and Finance (MEF), Alex Contreras, pointed out that the economic cost of Cyclone Yaku was preliminarily estimated at S/1. 321 million.

At the sector level, the BCRP estimates that metal mining will now grow by 7%. Previously, its projection was 8.6%. While the fishing item would increase by 5% and no longer 11.6%, as planned three months ago.

Social conflicts also had a negative impact on the confidence of businessmen and consumers, which will reflect lower growth in private consumption, going from 3% to 2.8% for this 2023.

It is worth mentioning that the expected growth for 2024 would be 3%, estimate similar to that of a quarter ago.

private investment in decline

Another indicator that the BCRP reduced was that of private investment. In its previous report, the issuing entity expected growth of 1%; however, it now projects —for the second consecutive year— a decrease of 0.5% by the end of 2023.

The greatest fall would be observed in mining investment, with -16.7%, mainly due to the non-construction of large mining projects in Peru. Meanwhile, non-mining investment is projected to grow by 1.5%.

Despite this negative percentage figure, the holder of the BCRP He clarified that private investment is high. In detail, the disbursement expected for this year is US$51,848 million.

On the other hand, the Central Bank revised upward the growth of public investment, from 0% to 1% for this year, due to the higher spending observed in the first months and by the measures of Con Punche Peru.

Chicken price would drop in May

The avian flu has pushed up the prices of chicken and eggs. However, as the supply of this bird recovers, a drop in its cost will be observed in the coming months.

“The stock of poultry is recovering and in May the price of chicken will probably normalize. In the case of the egg, it would take longer, and it would probably normalize in June,” Velarde pointed out.

Despite this, for the BCRP, annual inflation at the end of 2023 would be 3%, reaching the upper limit of the target range (1%-3%).

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Julio Velarde, president of the BCRP

“Without the protests, in a normal climate, we would probably grow 2.4% (in February); we are expecting to grow 0.4% or 0.5%. March will have an impact, but it will be more due to Cyclone Yaku”.

Alex Contreras, Minister of Economy

“We have gone from social conflict to facing a new shock, which was Yaku, that has generated an economic impact of around S/1,300 million, What are the estimated losses?