World Bank: Peruvian GDP will grow less due to the political crisis

The World Bank cut from 2.4% to 2.2% forecasts for economy growing Peruvian economy by 2023, a figure that contrasts with the always more optimistic projections of the Ministry of Economy and Finance (MEF), which in its last report in April pointed to a 2.5% increase in GDP.

This decline of 0.4 percentage points from the 2.6% with which the World Bank started the year would be influenced by the latent political instability that scares away private investment, with a particularly incidental effect on consumers and companies.

Thus, in the first and second quarters a GDP variation of 3.9% and 3.4%, respectively, would have been reached, while for the third quarter it would increase 2%. In the last quarter a modest 1.7% is expected.

The report also attributes the ravages of the protests after the failed coup by Pedro Castillo, although it acknowledges that the rate of copper exports —affected by the road closures at the beginning of the first quarter— will continue at 5% at the end of the period.

On the other hand, the World Bank reports that resorting to public spending to compensate for the lack of private investment will not appease the restrictive monetary policies of the Central Reserve Bank (BCRP), so interest rates will remain high “throughout the year due to persistent inflation underlying” above the target range of 3%.

“Growth of 2.6% is expected in 2024, but it depends on the reduction of social tensions and the gradual recovery of investment,” they stated.

Missing Investments

This is a natural setback on days when the meager collection to May recorded S/11,537 million, which “reflects the reduction in economic dynamics” for Sunat, with GDP growth in April that would have been around 1, 5% and an internal demand that would have fallen 3%, according to preliminary figures from the BCRP.

To this is added the reduction of just over 9% that imports in May would have registered and the lower exchange rate, which stood at S/ 3.69, contracting 1.8% compared to the same month last year. .

For Juan Carlos Odar, director of Phase Consultores, the 2.2% drawn by the World Bank maintains an “optimistic” look after a disastrous first quarter, which is why he estimates that future forecasts should fall to 1.5%.

“The greatest perception of risk comes in recent weeks from China, with a performance that is out of line with its 5% growth forecast, in addition to the modest recovery in the Eurozone. All of this has a negative effect on other markets,” he adds.

For example, recently, the Association of Exporters (ADEX) reported that Peruvian shipments fell 2% in the first quarter.

A situation that has even been observed by the Fiscal Council (CF), which in May indicated that the projected growth of the MEF of 2.5% did not take into account the El Niño phenomenon.

Carlos Oliva, a member of the CF and former head of the MEF, anticipates that analysts will marginally be honest with their predictions, since the needle of recovery has not yet found north.

“Although there is a slight increase in expectations, It is not yet so marked as to foresee that private investment can resurge and be the engine of the economy that we all would like. The World Bank thing makes sense,” he told La República.

Credicorp expects 2.0% for Peru

The expectation of economic growth of Peru it continues at 2% for 2023, while for 2024 it is 2.7%, estimated the financial group Credicorp. They agree that the reading of the MEF and that of the BCRP (2.6%) “are still in a high range of the market estimates, which expects a variation of 1.5%.”

Credicorp assures that private investment is in negative territory, less than 1%, and that during the first quarter it fell 12%.

According to the latest official statement from Enfen, there is a 68% probability for the appearance of a new El Niño phenomenon in the Central Pacific in the summer of 2024. “There is a slight recovery, but it is not consistent that it will move the la private investment, which is still negative at the end of the year”.

World Bank and Peru’s GDP in the eyes of the world for 2023