GDP in a nosedive: it would only grow 0.9% this year, warns the BCRP

The national economy will close the year with a growth of just 0.9%, according to the Central Reserve Bank of Peru (BCRP). This reading is starker than the 1.1% predicted by the Ministry of Economy and Finance (MEF).

Julio Velarde, president of the BCRP, points out three reasons why GDP will stagnate: droughts in the southern region, El Niño Costero in the north and social protests, which “generated a COVID-19 level confinement” at the beginning of anus.

By sectors, fishing is expected to have the worst annual result and plummet 26.4%. It is worth noting that the first anchovy capture season was not carried out to preserve the species and confirmation of the Produces for the second season, although in Velarde’s opinion this would have a “very small” impact.

Agriculture, manufacturing—especially primary, due to the lower production of fishmeal—and construction will also end negatively (see infographic).

An inauspicious year

For its part, the National Institute of Statistics and Informatics (INEI) announced that the Peruvian GDP fell 1.29% in July, witnessing its second sharpest drop of 2023.

This information destroys the speech of Alex Contrerashead of the MEF, who assured what mantra in times of storm that July would bring “the highest growth rate of the year.”

Thus, considering the 0.9% predicted by the BCRP, the Peruvian economy is on its way to its weakest variation since 2001when, weighed down by the political noise left by the Fujimorate and the ravages of El Niño, it closed at 0.6%.

The economist Luis Arias Minaya warns that the Government does not have the rudder to emerge virtuous from the attacks of the climate, political tension and social discontent, to the point that it could grow less than 0.6%, considering that a few months ago It was trite to think that we couldn’t be worse than in 2009, when the financial crisis global limited GDP to 1.1%. “Did anyone doubt that this is a recession?” she reasoned.

However, Velarde believes that in the remainder of the year the economy will grow even though the BCRP now expects a moderate or strong El Niño phenomenon (no longer weak or moderate). According to the banker, GDP in August and September will rise 1.3% and 1.9%, respectively. By October it would expand to 3.4% and in November it would reach the peak of 4.1%. In December, it would be 3.0%. The category of goods and services would support this performance.

Job quality loses ground

At the end of the first half of the year, 17 million 278,000 Peruvians work. Of this universe, 8.4 million are underemployed. The difference with proper employment is minuscule.

In Metropolitan Lima, the balance continues to lean towards precariousness: of the 5 million employed as of August, 2.1 million are underemployed, 22.7% more than before the pandemic; and those adequately employed, 3 million, 3.2% less than in 2019.

Food prices will not ease

The BCRP increased its inflation estimate at the end of this year from 3.3% to 3.8%, since climate phenomena will continue to impact food prices. Thus, inflation in food and energy is expected to close at 4.9% (no longer at 3.4%).

An example is lemon. They predict that in September it will reach a ceiling of S/15.7 per kilogram, and only towards December it will drop to S/6.58. Velarde recalled that the reduction in inflation does not translate into a drop in prices in the short term.

The data

On the floor. In annual terms, Peruvian GDP rose 0.5%: the worst rate at the regional level, only surpassing Chili (-0.9%).

Vulnerable. GDP stagnation “will increase poverty, but I won’t say how much,” Velarde added.

Reactions

Julio Velarde, president of the BCRP

“(The GDP) has been hit in the primary sectors, derived from the droughts in the south and El Niño in the north, which is now felt in the price of lemons.”

Luis Arias Minaya, economist

“The GDP will be lower than 0.6%. The three cyclones, climatological, political and social, will continue throughout the year, in addition to high food inflation.”