Long-term business confidence deteriorates

In a context in which the president Dina Boluarte traveled to the US with the intention of attracting investments to Peru, the latest survey carried out by the Central Reserve Bank of Peru (BCRP) reveals that business confidence for the short and long term deteriorated in Octobermonth in which the Ministry of Economy and Finance (MEF) admitted that we are in recession.

The indicators of business expectations and the current situation in 3 and 12 months are worse than in July of this year (see infographic).

This deterioration occurs after a moderation in expectations was observed in September, which had been highlighted by the head of the MEF himself, Alex Contreras.

Thus, of the 18 indicators for the month of October, 11 are in the pessimistic range and 3 are close to this threshold.

In detail, there is a lower expectation on the part of businessmen to increase their investment and hire more staff within a year. Additionally, there is now less optimism about how their sector and the national economy will fare in 2024.

Entrepreneurs in mining and hydrocarbons, manufacturing, and services affirm that their level of sales and production have decreased in October.

At the regional level, the southern zone is the one that shows the greatest deterioration in its expectations, while in the north there is a recovery in most of the current situation indicators.

Likewise, the companies surveyed consider that the factors that most limit the growth of their company in the short and medium term are political instability, social conflicts and the difficulty in processing services with the State.

Complicated expectations

Daniel Hermoza, director of Mypes Unidas del Perú, maintains that the results were predictable, since there is less optimism that sales for the Christmas campaign will be better than last year. In addition, there is uncertainty about how small businesses could fare in 2024, considering the cooling of the economy and the risk posed by the El Niño phenomenon.

“There is no hope that things will improve and that 2024 will be exactly the same or worse than 2023,” Hermoza said for La República.

The representative of the mypes adds that businessmen no longer think about investing in machinery or hiring more personnel to increase their production because the low economic dynamism does not allow it.

In this sense, the union representative asks the president to restructure the ministerial cabinet and appoint a prime minister who generates confidence among investors. “The Government has been given stability, but not the country,” she concludes.

GDP would grow this year between 0.1% and 0.3%

Analysts and financial entities forecast GDP growth for 2023 to be between 0.1% and 0.3%. While by 2024 they expect the growth of the economy to be in a range of 2.0% and 2.4%, according to the BCRP survey.

Finally, the expectation of the reference interest rate for the end of 2023 moved to a range of 6.75% and 7.00%, due to a downward revision by economic analysts. The forecast for this variable remains between 4.75% and 5.00% for 2024.

The word

Daniel Hermoza, director of Mypes Unidas

“Recession impacts investment prospects. “If it was planned to buy a machine to increase production or hire more staff, it will no longer be done because the market will not react.”