For the second year, Peruvian GDP would grow less than the region

After the ghosts of the pandemic dissipated, the Peruvian economy it will barely grow this year below 1.0% –and with strong downward biases due to the climate emergency, which could take it to 0%–. What explains the deterioration? The protests after the arrival of Dina Boluarte The Government Palace still has a dent in the indicators, since “the isolation was as strong as in COVID-19,” according to Julio Velarde, president of the Central Reserve Bank of Peru (BCRP); in addition to an aggressive El Niño phenomenon.

The inexorable freezing of GDP – which would end this year with its lowest variation in just over two decades without counting the coronavirus – translates directly into lower job creation and a rise in poverty.

“More or less for each point of minor growth, approximately 150,000 jobs are no longer created. If at the beginning of the year a GDP of 3% was expected, and we end up at 1%, there are 300,000 jobs that will no longer be created. And, to survive, these people have to turn to temporary and inadequate jobs,” former Minister of Economy and Finance Luis Miguel Castilla tells La República.

It also points out that we are heading towards a monetary poverty ratio of 30% of Peruvians: a third of the population, the same figure that 2020 showed with the coronavirus storm.

Are we still solid?

The country’s macroeconomic strengths, even with the onslaught of the health emergency, were never in question and is one of the most sustainable arguments for our aspiration to the Organization for Economic Cooperation and Development (OECD).

Growth below the region

Although now apart from the cooling of the GDPprivate investment will fall by 5% this period – and mining by 18%, and by 2024 it will continue on that dark path – and business expectations have been in a pessimistic stretch for 29 months, added to the fact that we are at the limit of the fiscal deficit and Tax collection continues to fall, what awaits Peru is a challenging panorama, since for the second consecutive year we will be below the average economic growth of Latin America (1.6%), they note from the BCRP.

Along these lines, Brazil (2.0%), Colombia (1.0%) and Mexico (2.5%) will have a better 2023 in economic terms than Peru. While Peru, with a growth of 0.9% –according to the BCRP forecast, it would only surpass Chile and Argentina, which would have a fall of 0.5 and 2.0%, respectively–.

According to Castilla, the essential thing is to recover business confidence by eliminating the disagreements within the Executive Branch that undermine certainty, in addition to having to deal with the proposals of the Congress who have no spending initiative.

These numbers burst with the always optimistic vision of Alex Contreras in the MEF; and in the opinion of the economist Armando Mendoza, they reaffirm that the so-called economic miracle is yesterday’s periodic.

“That thing that it will trickle down for everyone from above has been demonstrated, not only in Peru, that it does not work. He arrives late, badly and never. Policies are needed to reduce inequality and develop opportunities for all. The privileged sectors accumulate privileges at the expense of the entire society and increase inequality,” he said.

But what pushed us to grow less after the roar of the health emergency? Castilla points out that politics weighs too much, since a decade ago – during the administration of Ollanta Humala, when he was appointed the MEF and the GDP rose at rates close to 6% – in Congress the ruling party was a majority and there was governability , unlike in recent years, where high rotation and political discontinuity persist.

Although we must step on the ground regarding aspirations to the OECD, according to Mendoza, since we are “eternal applicants” to a global bloc where we do not comply with what is essential: being a first world economy. For example, OECD expresses its concern about the high concentration in our market and a precarious labor market where underemployment abounds, added to the weakening of democracy.

1 in 3 Peruvians will be poor

Federico Arnillas, president of the Roundtable for the Fight against Poverty (MCLCP), warns that monetary poverty will reach 30% of Peruvians, and would even slightly exceed what the pandemic left behind – 10 million compatriots without sufficient income to meet your daily needs.

In addition, the total number of Peruvians at risk of falling into poverty would also increase. It should be noted that currently 11 million citizens are in this limbo, the situation worsening with inflation – especially in food, which reached 11%, doubling the general figure.

Furthermore, in the equation of all evils, the Government will only take into account the poor in the multidimensional sphere: lacking basic services, housing, education and health. There are 12.1 million Peruvians who do not have access to these basic items in any society.

“Even in terms of extreme poverty it would also exceed what there was in 2020: more than 5 million Peruvians. We managed to reduce poverty from 60% to 20%, but for years there has been stagnation,” Arnillas reflected.

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Luis Miguel Castilla, former Minister of Economy

“About 150,000 jobs are no longer created for each point of lower economic growth. “There will be an impoverishment of the population due to lack of adequate employment.”

Armando Mendoza, economist

“Another fantasy that was sold in the nineties was that it would benefit everyone (GDP growth) with the concentration of resources. It was not so. This trickle arrives late, badly or never. Inequality must be reduced.”