The slowdown in GDP – it fell 0.5% in the first half and is expected to close the year below 1% – is largely explained by the contraction of private investment and the low confidence of consumers and businessmen, according to the latest report from the Central Reserve Bank of Peru (BCRP).
In the first semester, private investment fell by 10%June already accumulated four consecutive negative quarters, and, by the end of the year, the monetary authority expects it to decline to -5.3% —more than double what they expected in June (-2.5%).
The deterioration will be more aggressive in private mining investment (-18.1%), since there is no project of the magnitude of Quellaveco on the horizon, “which in the first semester already spent everything and started producing,” Julio said. Velarde, president of the BCRP.
The banker mentions that projects such as Inmaculada (Ayacucho), Toromocho (Junín), Zafranal (Arequipa) and Yanacocha Sulfuros (Cajamarca), as well as other brownfields – on existing mines and with less paperwork – “will take a while” to revitalize the sector. . By 2024, private mining investment is expected to fall 7.6% and total investment to rise 1.8%.
The decline in private investment—the BCRP projects that the private consumption it barely increases 1.2% this year—affects sectors such as manufacturing, construction and services. For example, Velarde mentions that now there are lower indicators of housing construction (self-construction) and social real estate programs.
SNI: “Lack of predictability”
On the verge of one year of Dina Boluarte’s government, the business expectations collected by the BCRP, specifically for the short term, have accumulated 29 consecutive months in the pessimistic section and are recovering at a “slower pace than expected.”
Jesus Salazar Nishipresident of the National Society of Industries (SNI), warns that radical measures are required to reverse the freezing of the economy, and this requires not only the will of the Executive Branch, but also of Congress, the Comptroller’s Office and judicial bodies to unblock projects.
The union leader maintains that 2023 “is getting out of hand” and enough bullets are required for areas such as industry and construction —that in July plummeted 13.89% and 8.80%, respectively—come out of the “big rebound next year” with flying colors. For the current, it is considered that the GDP will barely close at 0.7%.
“A shock of investments in building and infrastructure is required for the works for more than 20,000 million paralyzed soles. There is no predictability and that is the worst thing in the private investment scenario,” he commented for La República.
Likewise, he assured that Boluarte’s policies must be disruptive to help the more than 2 million mypes, which are largely informal. Experience demonstrated – in his opinion – that credits from the financial system are not enough due to the nature of these businesses that operate in the dark.
For his part, Daniel Hermoza, director of Mypes Unidas del Perú, considers that it is “very complicated” to develop in “another lost year” for small businesses.
“We are certain that this Government is not up to the task of solving the crisis and, as a result, uncertainty is multiplying in all economic actors. Result: thousands of mypes in bankruptcy“, argument.
Public investment will fall in subnational governments
In the balance, the private investment It covers more than 80% of the total in the country, leaving the rest to what can be done in the public sector. For the BCRP, the total investment borne by the State will rise 1.5%, supported by the 15.2% in the national government. Otherwise, it is expected that the Regional governments and local ones decrease investment by 3.3%.
In the words of Velarde, it is common that after a year of replacement of subnational authorities, public investment decreases. In the year before the pandemic it fell to 1.5%.
Furthermore, the public deficit—at the limit of 2.4%—“is being greater than expected due to the drop in income” following lower commodity prices and a decrease in economic activity.
The word
Jesús Salazar, president of the SIN
“There is no predictability. If you want to recover business confidence, a strong shock is needed with radical and far-reaching measures. The (GDP) numbers discourage investment.”
Source: Larepublica
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