Economy will grow 1.1% this year: poverty and unemployment are anticipated

Peruvian GDP will be inauspicious this year, since the Ministry of Economy and Finance (MEF) reduced its growth estimate for the current year from 2.5% to 1.1%, discouraged by a 4.5% drop in the private investment, translated into more than S/111,000 million.

It is an honesty that places the economy at 14-year lows, since 2009. As part of the presentation of the Multiannual Macroeconomic Framework (MMM) 2024-2027, Minister Alex Contreras anticipated that, although a 3% progress is expected in August, assisted by “mining production and sectors associated with consumption”, the local scenario it will be exacerbated by inflation that remains at peaks of 5.9%. The calculation of this drop in GDP in more than a decade does not take into account the 2020 financial year, corresponding to the pandemic.

For the MEF, the high level of social conflict, the scourge of the climate emergency and various international factors that occurred during the first semester —it fell 0.45% until June— are responsible for this downward revision.

Now, the Peruvian government plans to launch new packages of measures towards the last third of the year, most of them set as an extension of previous programs, such as the new version of Reactiva Peru, which will actually be a reorientation of the Crecer Fund.

grow from below

He MEF It is clear that the recovery of the economy must start not only with the encouragement of large-scale private investment, but with rescue measures for mypes, which represent 96% of the country’s business force.

For this reason, Contreras said that, through Reactiva Peru, guarantees will be granted for loans with rates of less than 10% aimed at micro and small businesses, with an emphasis on “debt consolidation”, a particularity not contemplated today in the design of Grow.

“We are going to make some adjustments to the Fund Grow so that it is as dynamic as Impulso Myperú, which was the most successful credit access program for this sector because it summarizes the best practices of recent years with Reactiva Perú and FAE-Mype”, he told the press.

Another workhorse is the commitment to public investment. Precisely, the MEF has ignored the alert from the Comptroller General of the Republic regarding the fact that regional governments have only executed less than 6% of their budget to deal with the El Niño phenomenon (FEN), and has clarified that it is not considered for the I count the accrued resources, but the “commitment and certification”, which will only yield results in the last quarter.

“It will be paid after the execution, it is not correct to speak of 5.6% because the decision has been not to pay until the works are completed. […]. There is a lot of expectation towards December, and the request for the population is to keep calm, do not be scared, because works have been underway since May ”, he remitted.

This is a particularly critical chapter, since, according to the ministry itself, an “extraordinary” FEN —with a second cancellation of the anchovy fishing season, loss of crops, and limitations on transportation and consumption— would lead the economy to collapse 0.5% in 2023, something not seen in a quarter of a century.

A Peru with more poor

This 1.1% growth will not contribute to reducing poverty. Minister Contreras asks to wait until April 2024 to know the impact of this meager productive progress, but he accepts that the scenario is complicated.

The situation of poverty increased in 2022: it represents 27.5% of the population, some 9 million 184,000 citizens.

“In a scenario of low growth there is a risk that poverty will increase, which is why the great component of Con Punche Peru were specific measures to attack it, with S/3,000 million for social programs, mass services, temporary employment, etc.” lamented the official.

Meanwhile, Peruvian families, according to the update, will have to endure inflationary waves until mid-2024 and, in some sectors, an unemployment curve that does not finish translating “the consistent figures of the private formal sector, which remained resilient.”

Contreras is sincere on this point and acknowledges that the 1.1% increase in GDP will translate into “lower job growth and fewer opportunities for citizens to get out of poverty”, but asks to wait for new packages to contain a crisis every neighbor again.

“What we are going to see from now on are families hit in terms of employment that probably have been beneficiaries of the measures of the Plan Con Punche Peru,” he said.

keys

accounts. According to the MMM, the MEF expects to end the year with a 2.4% deficit, even within fiscal rules.

East. Minister Alex Contreras announced that they will seek to provide more resources to the governments of the Amazon region, a territory where “there is no agenda” and where drug trafficking, human trafficking and illegal gold mining are rampant.

Peru still in debt at the mining level

The MEF questioned that many of the mining projects planned in the last four years, such as Corani and Pampa del Pongo, have not materialized to date.

“From 2019 to 2020, projects for more than US$5,342 million were expected. Of these, only one or two have materialized, the rest have been postponed, ”he criticized.

However, he welcomed the work carried out by Senace (PCM recently ruled out its merger with other environmental organizations), Minam and Cultura to unlock projects, although he accepted that there are deadlines to improve, and that is why Canseipp will be installed.

The MMM moderated commodity projections: copper will hold, gold will rise and zinc will fall slightly.

The word

Alex Contreras, Minister of Economy

“We will continue to promote public investment. The second semester will be challenging, since last year there was a record. We will do some coordinated reallocations with subnational governments.”