Carlos Augusto Oliva Neyra: “The most worrying thing is that poverty is not going to be reduced, quite the contrary”

Between January and May, the GDP contracted 0.49%, which has caused the various entities to revise their estimates downwards, even reaching a growth of just 1%. Faced with this scenario, the former Minister of Economy Carlos Oliva makes an analysis of the economy and the impact that the country will have by having low growth.

—How do you assess the performance of the economy in the first half of the year?

— Unfortunately, it has been a semester in which the economy has stagnated. The growth that is expected for the first semester is 0% or even a few negative tenths; So, from every point of view, it is a result that is far below the country’s growth possibilities. There have been some factors that have made the figure worse than what we were all expecting, mainly the social conflicts at the beginning of the year and also the El Niño phenomenon as of March, but even so we notice that there is a private investment that is not growing and unfortunately it is negative.

—The Minister of Economy says that the highest growth rate will be in July.

— Saying that it will be the highest number of the year does not tell us much, the highest has been 0.3%, so we really are not ready for more than that; Instead of saying that, he would have given his forecast for July. Beyond that, the second semester is expected to be better than the first, especially since these exogenous factors are apparently going to disappear, especially the social crisis, it is not expected that there will be something similar in the second semester. Therefore, we could have a second half of the year growing above 2%, and that as a final average for 2023 gives us growth close to 1%, which is disappointing for Peru.

Vision. The MEF expects GDP to close this year at 2.5%. Photo: diffusion

—How much does the economy lose by not growing at rates of 4%?

— Very much. One point of GDP is almost S/10,000 million; losing four points of growth is S/40,000 million, and the most worrying thing is that poverty is not going to be reduced, quite the contrary; it is very likely that this year poverty will increase even more than it did last year. The losses are due to the falls in the income of a significant percentage of the population due to the lack of dynamism in formal employment, and this affects the quality of life of many people.

Has business confidence improved?

— Unfortunately, confidence has deteriorated, according to the latest measurement made by the BCRP. Surely, in the coming months that is expected to the economy grows a little more, confidence begins to recover, but it is not going to recover as much as it should be; There are a number of factors that affect the investment expectation of all types of entrepreneurs.

What are those factors?

— First, it has to do with the fact that there is no clear roadmap for the coming years, many of the measures taken by the Government are short-term, but no measures have been seen to increase the competitiveness of the economy, there is a National Competitiveness Plan that in practice it has been set aside even though it is still valid; So, if you ask someone what the expectation is in economic terms for the next few years, you don’t know. On the other hand, there are a series of elements in Congress that are harmful to the economy and the Executive does not say anything or is very timid in making itself felt. There is an institutional issue that is worrying and if it is combined with the lack of this roadmap, any businessperson thinks twice before increasing investment.

—There are no large mining projects either.

— In the mining part, there is a portfolio of US$50,000 million that they announce that they will promote it, but in practice it is not seen and each time the mining companies move forward the start dates of their projects, which were scheduled for 2023 and are now for 2025 or 2026.

-The collection has fallen. How much could it influence the 2024 budget?

— That is super important. We want the MEF to update its growth figures for this year and especially for the next; the last update in April is already far from reality and that influences the 2024 budget. In the Fiscal Council we should receive the Multiannual Macroeconomic Framework at the end of the month to issue our opinion. We’ll see what does the government propose. Beyond this moderate optimism, you have to be realistic and not project great growth that nobody is seeing and that, on the contrary, can cause you to inflate the tax figure and in the end, when you grow less, you are left with spending and the tax is less than expected, and that generates a deficit. In the Fiscal Council we are quite concerned about compliance with the fiscal rule.

Have the MEF programs had the expected effect?

— There are two problems: first, that only 30% of everything that has been promised in with punch 1 and 2 and for emergencies. And second, it’s a fairly limited program; it takes more than that to raise expectations. There are other actions that would have a greater impact than Con Punche, such as the recovery of the National Competitiveness Plan and the repeal of the supreme decrees of the labor market such as outsourcing and unions.