11.4 C
New York
Tuesday, October 4, 2022

Latest Posts

Historic inflation, another stone in Pedro Castillo’s shoe

- Advertisement -

President peter castle he assumed his position when annualized inflation was at 3.81%; by then, our country was gradually moving away from the target range of the Central Reserve Bank of Peru (BCRP) —within 1 and 3%— as a result of the rise in the prices of imported goods and the depreciation of the sun against the dollar —explained in part by the turbulent political instability that preceded the arrival of the professor from Cajamarca to the Palace—.

- Advertisement -

A year later, inflation reached a peak of 8.81%, its highest level since 1997, exacerbated by the rise in fuel prices due to the war between Russia and Ukraine, a fact that affected the costs of corn, wheat, fertilizers and customs freight, putting global and national production on the ropes.

slow recoil

However, Juan José Marthans, director of the Economics area of ​​the PAD-School of Management at the University of Piura, explains that although some prices of these commodities have begun to decline, this does not mean that everything will stabilize in a jiffy since the factors behind the inflationary process will not disappear completely, which is why the central banks —led by the United States Fed— have had to increase their interest rates to sustain the economy.

“Some international prices such as oil are going to be diluted, but it will not be enough to return to the inflationary range. We are going to have to face the recessive burden of what compromises the interest rate adjustment (…) We will inevitably have an inflationary rhythm accompanying the globe and Peru with a significant slowdown in GDP expansion dynamics, that is, a potential danger of a stagflationary crisis that would complicate things”, he points out to La República.

Inflation until 2024

- Advertisement -

Various specialized entities project that inflation in Peru will return to its usual flow only by 2024, even exceeding the reading of the BCRP, which expects the indicator to fluctuate between 1 and 3% for the third quarter of 2023.

For example, for BBVA Research, the decline in the year-on-year rate would be “relatively slow” due to the risk of rising inflationary expectations, which would impact during the second half and the following year the prices of food produced in the country already farmers find it difficult to obtain fertilizers.

In this sense, Juan Carlos Odar, director of Phase Consultores, maintains that it is unlikely to close 2023 with inflation below 3%, although it would not be that far from this level either. “We will see a slow slowdown in inflation, but the worst, the strongest wave of the pace of price increases, it looks like if it’s not over already, it’s about to be over soon,” he said.

A similar scenario was drawn by the president of the BCRP, Julio Velarde, who predicts that the peak of inflation will occur in July.

Non-targeting measures

Odar emphasizes that the Government’s actions to address inflation have not been successful since it should have initially opted, for example, given the rise in food prices, for a targeted bonus; measure that Castillo’s management will undertake only after the exoneration of the General Sales Tax was unsuccessful (VAT), as well as the Selective Consumption Tax (ISC) on some fuels, which barely contained them temporarily but did not stop the upward trend.

Finally, for Marthans there is an asymmetry between the fight against inflation carried out by the BCRP and the Ministry of Economy and Finance (FEM), given that the issuing entity did not go wild when adjusting the reference interest rates because the productive dynamics could be damaged if it did not act prudently.

“It was a fact that they were not going to be well calibrated. Reducing the VAT for certain products in a country where trade and production is 80% informal was not going to work. The measures should have been focused so that programs such as Pension 65 or the common pots broaden their range of scope. That was more important”, he concludes.


Juan José Marthans, director of Economy PAD of Piura

“Some international prices are going to be diluted, but it will not be enough to return to the inflationary range. We are going to have to face the recessive burden of what compromises the adjustment of the interest rate”.

Juan Carlos Odar, director Phase Consultants

“We will see a slow slowdown in the pace of inflation, but worst of all, the strongest wave in the pace of price increases looks like if it’s not over already, it’s soon to be over.”

Food Bonus, the big bet

Facing the presidential message on July 28, Pedro Castillo is expected to provide more details of the Food Bonus, a measure that has been in the pipeline for approximately a month and that, as announced by the head of the MEF, Óscar Graham, will help the most vulnerable Peruvians during the food crisis.

The official has hinted that the subsidy will be targeted —unlike those already delivered during the pandemic—, and its value would amount to S / 300.

The total universe of beneficiaries of the new bond includes 1.5 million citizens belonging to the State’s social programs, along with those registered that the Ministry of Development and Social Inclusion (Midis) has been collecting.

Infographic The Republic

Infographic The Republic

Source: Larepublica

- Advertisement -

Latest Posts

Don't Miss

Stay in touch

To be updated with all the latest news, offers and special announcements.