Food and energy prices would rise almost 5%

The Central Reserve Bank of Peru (BCRP) recently revised downward the growth forecast for the Peruvian economy from 1.3% to 0.9%. This – among other factors – driven by low business confidence, which will result in a 5.3% drop in private investment at the end of 2023.

In a scenario marked by the rise in prices of the main products of the basic basket like the lemon and the imminent arrival of the El Niño phenomenon, the monetary authority also revised inflation upwards for this year from 3.3% to 3.8%.

This higher result is basically due to the fact that the price of food and energy is expected to rise by 4.9% at the end of 2023. In the previous BCRP report, an increase of 3.4% was expected.

Although food and energy inflation is less than half the levels reached in 2021 and 2022, it is still considerably higher than the 1.4% and 2.2% recorded in 2019 and 2020, respectively. The BCRP anticipates that it will be reduced to 2.4% next year.

Limón would drop in October

According to Julio Velarde, president of the BCRP, food and beverage prices rose around 10% in August. He said that this advance “hits the poorest,” since they have a higher food component in their basic basket.

According to Velarde, this result was driven by the increase in the cost of lemon and the slowdown in the decline in the price of eggs and chicken. However, he indicated that although the citrus would reach its maximum price during September, From October it would begin to decrease.

The estimate of BCRP indicates that in September the lemon would reach an average price of S/15.7 per kilogram. While during October it would be around S/15.10, after which it would fall to S/9.40 in November and S/6.58 in December.

For this calculation, what happened in 2017 during The boy.

That year, lemon rose to S/14.5 per kg in August and fell to S/3.6 in December.

Most affected products

The executive director of the Center for Social Studies (Cepes), Laureano del Castillo, points out that the main elements that will increase food inflation are related to climate stability and the performance of the economy in general. “The projections point precisely to the persistence of these factors,” he commented.

As for the climatic factorsHe added that there is concern that heavy rains repeatoverflows, landslides and floods that were experienced at the beginning of this year, as well as the drought that affects areas such as Puno.

“These climatic events have had a negative impact on agricultural production and have generated a decrease in plantings,” he commented.

According to the Cepes representative, among the most affected products would be corn, rice, potatoes and quinoa.

Among the fruits, the mango will also stand out, whose flowering stage was affected by the temperature variations in the previous months. “That is going to affect our exports, and without a doubt the supply of the national market,” he warned.

Finally, Del Castillo stressed that reaching the BCRP goal in 2024 will also depend on external factors such as the evolution of the war in Ukraine.

Inflation expectations for 2023

Inflation expectations, calculated based on surveys of financial and non-financial companies, as well as economic analysts, reveal a range for the inflation rate expected between 4.0% and 5.0% for 2023. They also foresee inflation between 2.95% and 4.0% for 2024.

Likewise, it is projected that the average prices of imports will be reduced by 6.5% in 2023, mainly due to the reduction in oil prices. Petroleum and some foods such as corn, wheat and soy. By 2024, an increase of 0.9% in these products is expected.

The word

Julio Velarde, president of the BCRP

“We are expecting that when the September figures come out it will be with an increase in the price of lemon, (then) it will reduce in October and begin to reduce more rapidly in November and December.”