Peru in recession: how does it affect the pocketbook and what should be done to protect finances?

After sustained economic growth between 2004 and 2019, our country faces a recession and there have already been several months with negative figures. In August, the Gross Domestic Product (GDP) fell by 0.63% and this situation is compounded by the reduction in private investment and business expectations. If you want to know more about the impacts of the recession on citizens’ economies and what recommendations to follow to protect money, continue reading this note.

What does a recession mean and how does it impact households?

According to economist Javier Zúñiga, A recession occurs when the Gross Domestic Product (GDP) of a country falls for two consecutive quarters, which causes population consumption, investments and job creation to reduce and show negative figures.ace.

“In the first instance, no importance was given to the recession because both the BCR and the MEF said that it was an issue that was going to be fixed during the year, and it was an issue that was not affecting employment and demand levels. Now, with a negative third quarter, it reconfirms that we are in recession. This means, when the economy does not grow and the GDP, which is generated by all countries, is in a negative situation,” he explained.

For Zúñiga, sectors such as fishing, manufacturing or agriculture will feel the impacts of the recession in three, four or five months, a situation opposite to what construction or mining workers will experience because they are growing. In addition to this, those most affected by this slowdown are the families that must restrict their consumption levels due to lack of resources.

How to protect your money in an economic recession?

Without a doubt, the recession is a cause for concern in Peru and leads to a decrease in economic activity and an increase in unemployment. In that sense, this negative growth affects production, access to work and business options for all entrepreneurs preparing for the Christmas campaign. If you want to protect your finances, keep the following recommendations in mind:

• When a recession occurs, the economy does not grow and there is no higher income. Be cautious and calm.
• Create a budget so you can organize your list of income and expenses, so that you prioritize them according to your main needs.
• If you are looking to apply for a loan, think about the period in which you will be able to pay it by evaluating the conditions of the interest rates.
• During the Christmas season, try to reduce expenses to maintain your cash flow.

Economist Javier Zúñiga explained the impact of the recession on the family economy and provided some recommendations to take care of personal finances. Photo: RCR

What measures should the Government implement in the face of the recession?

According to economist Javier Zúñiga, the government must implement a plan to reactivate those productive sectors that are in a situation of decline and boost them through cheaper sources of financing.

“The alternative that must be worked on intensively is foreign direct investment. We are a country with natural resources that we can exploit, especially in the mining and energy sector, within the framework of compliance with environmental regulations,” he said.

For the Minister of Economy and Finance, Alex Contreras, one of the main proposals to overcome the economic recession is the law of supplementary credits, which was approved by the Congress of the Republic with the purpose of financing more than S/1,581 million the expenses associated with the economic reactivation in the face of the El Niño phenomenon.

“The approval of this credit has measures for the security and reactivation of the industry. For example, for the construction sector, we are resuming the Good Payer Bonus and resources have been injected again, amounting to 100 million that will help. In addition , there are social protection measures in the face of the emergency,” he explained in RPP.