What does it mean for the economy to grow 13% this year?

Last week it was learned that the Peruvian economy exceeded pre-pandemic levels for the first time.

At the discretion of the economist and director of Phase Consultores, Juan Carlos Odar, the 9.71% advance of GDP during September of this year, as well as the 11.95% annualized (starting from October 2020), slightly pass the 2019 data.

It is worth remembering that both the Ministry of Economy and Finance (MEF) as the Central Reserve Bank of Peru (BCRP) raised their economic growth projections for the end of this year to around 13%. (See infographic)

:

More than a bounce

Let us remember that in 2020 the economy contracted by 11.12%, And if the situation is to equalize before COVID-19, GDP would have to grow this year by 12.4%, calculated Odar.

“The production of economic activity in Peru is more or less than US $ 220,000 million. On that, if you have fallen 11%, it is not enough to grow 11% to recover. It has to be higher, in this case, 12.4% ”, he specified.

However, he considered that if the expected 13% materializes, this would mean that the economy will have a level of activity 0.6% higher than 2019.

:

Odar noted that it is true that there is a recovery underway; however, he considers that due to the contraction of employment and per capita consumption “it is still not enough”.

Even recently, the Minister of Economy, Pedro Francke, acknowledged that currently the experience before COVID has already been overcome. “The GDP has continued to recover, we see all the variations compared to 2019, the huge drop we had was one of the largest in the entire continent (…) but we have recovered quickly and today we are 3% above our pre-pandemic level. This is quite significant, we have recovered and we are growing ”, he said.

Keep the rythm

The economist and professor at the Pontifical Catholic University of Peru (PUCP) Jose Oscátegui He argued that “we have already come out of the hole”, and to stay on the path of recovery it is necessary for the authorities to transmit confidence and undermine the political squabbles that destabilize the market; this added to large public investment projects that the current government has not yet defined.

:

Likewise, the former head of the National Superintendency of Customs and Tax Administration (Sunat) Luis Arias Minaya He recalled that if externalities remain in our favor, such as the rise in commodity prices, there is room for a marginal growth of 1 to 2 percentage points for the economy this year above 2019.

“Both the good progress of the vaccination process and the favorable winds from abroad (in relation to minerals), and the fact that there has not been a third wave, have made possible a gradual reactivation of the economy that has had good results in August and September” , he said.

Shelling

During the third quarter of this year, GDP grew 1.6% above the same period of 2019, according to the BCRP.

:

In detail, between July and September, domestic demand rose 14.3% compared to the same months of 2020, and 3.3% the year before the pandemic; while private investment and public spending grew 0.8% and 17%, respectively.

In addition, private consumption rose 2.8% compared to the third quarter of 2019, thanks to greater access to goods and services, as well as the gradual recovery of household spending and the labor market.

While private investment obtained a year-on-year expansion of 13.2% compared to the same quarter of 2019, due to the greater execution of construction projects and the impulse of self-construction in homes.

:

In the case of public consumption, this increased 21.1% due to higher expenses in road maintenance and upkeep services, as well as repairs in the Arranca Peru program and the expenses of the health crisis.

You look to 2022

According to the BCP, the Peruvian economy by 2022 would grow by 2%, which is a much lower margin than the one estimated by the MEF and the BCRP: 4.8% and 3.4%, respectively; despite the fact that the issuing entity lowered its expectations in its last report. The portfolio commanded by Pedro Francke update your forecasts for the coming year.

:

The data

Forecast. According to the Research Department of the BCP, the GDP in October would have grown to 6.5% compared to -3.2% in 2020.

Outcome. Consumption during October would rebound 41% compared to the same month in 2019.