GDP would grow just close to 2% during this 2023

For the economy to close at 2.5% this 2023, as expected by the Ministry of Economy and Finance (MEF), it would have to grow 3.8% in the remaining months, which is “practically impossible”, according to the economist Luis Arias Minaya.

Despite the El Niño phenomenon, the head of the MEF, Alex Contreras, maintains an optimistic reading, contrary to the Central Reserve Bank (BCRP), the World Bank and the Organization for Economic Cooperation and Development (OECD), which expect the GDP to fluctuate between 2.2% and 1.7% at the end of the current (see infographic).

“The INEI data for April show lower than expected growth, and there are some early data for May with a 15% drop in cement consumption and public investment. May is going to be similar to April and we would have a lower second quarter as well. Practically reaching 2.5% is unlikely,” Arias Minaya told La República.

It is worth noting that in the accumulated from January to April of this year, national production contracted 0.24% after the ravages of El Niño Costero in agriculture, to the point that this sector fell 14.21% in the fourth month, its worst figure since the second half of 1992.

Minaya assures that the MEF he incurs in an unnecessary over-optimism by maintaining his expectation at 2.5%, and, on the contrary, his position translates into a loss of credibility.

The risk of growing less persists

Julio Velarde, president of the BCRP, acknowledged that his estimate of 2.2% maintains a downward bias, since only a slight impact of the El Niño phenomenon is considered: 0.5% on GDP for this year and for the next, 0.6%.

The banker informed that they are being guided by scientific projections for their calculations, because “there is a 77% probability that the climatic phenomenon is weak or moderate”; Along these lines, he asserted that “the most destructive effect of El Niño has already occurred” and a more pronounced economic impact is expected only towards the fourth quarter of this year and the beginning of next.

Poverty will take time to recede

Apart from the El Niño phenomenon, political instability is another risk that threatens the country, adds the director of the Peruvian Institute of Economy (IPE), Diego Macera.

What would a smaller change in economic activity imply? Macera maintains that the year cannot be closed at rates of between 2% and 3% because at that rate “it will be impossible to reduce poverty and expand the middle class.”

Already from the Private Competitiveness Council (CPC) they warned that the closing of social gaps is made difficult by the loss of economic dynamism, social conflict and the rise in poverty —which covers 27.5% of the population, that is, 9.1 million Peruvians at the end of 2022.

Thus, they foresee that if the annual rate of 2% in the economy is maintained, it would take 28 years to reduce poverty to 20%, its pre-pandemic level; and even within the most optimistic scenario, with a rate of 6% as has happened before, the poverty ratio in Peru would only “normalize” in 10 years.

“The last 2 decades we grew, on average, at 4.4% per year. That is the sustained rate that we should aspire to, ”said Macera through her Twitter account.

Entrepreneurs do not trust the government

Arias Minaya warns that the outlook is becoming more complicated with the 2.5% drop in total private investment —previously projected at -0.5%—. Breaking down this indicator, mining investment will now fall 18.9% and non-mining investment, 0.5%.

The aforementioned factors, in a context in which inflation will close for the third year outside the target range, will directly hit vulnerable Peruvian households, considering that fewer jobs will be created and consumption capacity will continue to weaken, added the former head of the Sunat.

In this line, the economist José Távara points out that the collapse of private investment is a faithful reflection of the fact that the political crisis has not been resolved despite the change of command.

“There is no confidence from investors and they do not see a clear direction for the Government to last until 2026, as announced by President Dina Boluarte. Without private investment it will be difficult for the economy to reactivate. It is as important as public and private consumption”, argued the also PUCP researcher for this newspaper.

Távara regrets that since the 2016 elections —when Pedro Pablo Kuczynski defeated Keiko Fujimori— the political maelstrom has overshadowed the market with the struggles between Congress and the Executive, and it is not healthy that since then presidents have come and gone fleetingly .

To all this, in the latest BCRP Business Expectations report, only 8 of 18 indicators are in the optimistic range.

“We see a slow recovery of business confidence regarding the economy, its sector and its company. We see a strong rise in December, but with the protests they went down in January, and from there it started to go up, but gradually. Just for 12 months they are in the positive terrain”, said Velarde a couple of days ago to the press.

The improvement in business confidence is going at a snail’s pace, which “expands” some better news for the country, the head of the BCRP was able to say in a presentation with businessmen at the beginning of June, referring to the lack of large-scale projects .

Gamarra regrets the government’s negligence towards mypes

Susana Saldaña, president of the Gamarra Peru Association, questioned that the Government of Dina Boluarte so far has not allocated a credit to the mypes of the commercial emporium despite the fact that it has been in force for 2 months Impulse MyPeru.

“Financial entities deny the existence of the program or they tell them that it is for their clients”, he recriminated, and, with this, production costs are more expensive and they are not allowed to compete on equal terms with other companies.

In addition, he said that this inaction puts textile businesses on the ropes, considering that manufacturing, which includes the textile and clothing industry, will now grow 0% this year.

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José Távara, economist and PUCP professor

“There is no confidence from investors and they do not see a clear direction for the Government to last until 2026, as announced by President Boluarte. Without private investment it will be difficult for the economy to reactivate ”.

Luis Arias Minaya, former head of Sunat

“It is surprising that the MEF maintains that rate of 2.5% perhaps so as not to contradict the premier Alberto Otárola who said 3%. It is an over-optimism that the only thing that leads to is the loss of credibility”.