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MEF asks “not to lose hope” despite lower estimates of GDP growth

MEF asks “not to lose hope” despite lower estimates of GDP growth

In line with other international organizations and banking entities, the Ministry of Economy and Finance (MEF) cut its estimate of economic growth for this 2023 from 3.5% to 2.5%, explained by the negative impact that the conflicts have left and social and global phenomena during the first quarter of this year.

According to Macroeconomic Projections Update Report (IAPM) for 2023-2026 prepared by the MEF, private investment would close for the second consecutive year with a fall of -0.5%, after its previous forecast expected an increase of 2.5%.

This strong reduction is explained by the “collapse” that private investment had in the first quarter, where a 13% drop was observed, a setback that had not happened since the 2009 financial crisis.

However, the head of the MEF, Alex Contreras, estimates that in the third and fourth quarters a positive result would begin to be registered of this indicator.

“The fall in investment will begin to reverse from the second quarter, our projections are consistent with positive investment rates in the third and fourth quarters,” Contreras Miranda explained at a press conference.

Despite this lower forecast, the Economy Minister indicated that 500,000 jobs will be created this year and asked the population to have confidence that the numbers will improve. “Don’t lose hope, that’s my message,” he said.

insufficient growth

With the current estimate of the Government, it would be the second consecutive year in which the national economy it would grow below 4%, the minimum rate the country needs for these macroeconomic results to be reflected in the population.

For the economist Armando Mendoza, this update of the estimate was to be expected and only confirms that it will be a “new lost year”, since a growth of 2.5% is insufficient if progress is to be generated in economic and social terms. This, in a context where nominal income in Metropolitan Lima during the first quarter of 2023 it was S/1,841, which represents a drop of 11% in real terms compared to a similar period in 2019, according to the INEI.

“Growing below 4 or 5% a year in real terms is not felt, growing less than that does not generate a reduction in poverty, a substantial improvement in social indicators or an increase in the actual income of people, improve the economy of families. A growth of 2.5% is a lost year,” affirms Mendoza.

The expert adds that before the pandemic it was estimated that one percentage point less in economic growth meant that up to 150,000 jobs would stop being created, which could be the impact that this lower macroeconomic outlook would bring.

It is worth mentioning that while adequate employment is 1.7% below the levels of 2019, underemployment grew by 19.5% during the first three months of 2023.

In this line, the Vice Minister of Economy, Zósimo Juan Pichihua, stated that greater growth during the first decade of this millennium has allowed the poverty is reduced steadily, however, in recent years this has not been replicated, since the GDP growth was low.

“This situation, accompanied by the precarious situation that informality generates, makes the advances that are made precarious. So, the only possibility of being able to advance in a sustained manner is to recover that growth that we were able to have in the first decade of this millennium “, confirmed the official.

He also recalled that 85% of poverty reduction is the product of economic growth, while the other 15% is due to redistributive policy.

For his part, Mendoza adds that with this GDP result, poverty will once again stagnate and the quality of employment will not improve. “We are not going to have positive poverty results this year,” he points out.

S/12 billion less to close gaps

The head of the MEF, Alex Contreras, regretted that the Constitutional Court ratified the ruling that condones the interests of the large tax debts. He added that this will imply a loss of S/12,000 million in income.

“It generated a negative impact for the country, especially in a current context where we see that resources are needed. We are fiscally solid, but what we have lost, which is close to S/12,000 million, would have gone to close the gaps,” commented.

Data

Risk. A possible El Niño phenomenon would impact fishing, agriculture and primary manufacturing.

Measures. The Ministry of Economy announced that they are preparing the Con Punche Peru 3 Plan to continue reactivating the national GDP.

reactions

Zósimo Juan Pichihua, Vice Minister of Economy

“If we want to reduce poverty, we have to rapidly recover, in a sustained and high manner, the country’s economic growth, which explains 85% of the reduction in poverty.”

Armando Mendoza, economist

“Growing 2.5% is a practically lost year. These 2.5% growth levels are absolutely insufficient to generate a substantial advance in economic and social terms”.

Infographic - The Republic

Infographic – The Republic

Infographic - The Republic

Infographic – The Republic

  Infographic - The Republic

Infographic – The Republic

Source: Larepublica

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