“The economy is still going through a difficult situation,” warns the BCRP

Less than two months before the end of 2023, the peruvian economy It does not show clear signs of recovery and is on track to record its third consecutive quarter of decline.

And, after having registered falls in the first (-0.4%) and second quarter (-0.5%), the Central Reserve Bank of Peru (BCRP) predicts that in the third quarter there will also be a contraction in the national Gross Domestic Product (GDP). These results mean that the issuing entity’s projection for the end of the year of 0.9% has a downward bias.

“Possibly, the third quarter we will have a negative growth rate again. The El Niño shocks, above all, have had a greater impact on the economy,” said Adrián Armas, central manager of Economic Studies at the BCRP, during the presentation of the monetary program for the month of November.

The decline in the economy would be due to the shocks derived from social conflicts and El Niño, which have affected economic activity and domestic demand with a greater impact than expected.

“Possibly the rate in October will not be as negative as what would be seen in the third quarter; “The economy is still going through a difficult situation,” he summarized. Adrian Armaswho detailed that the leading indicators and expectations about the economy in October have deteriorated compared to the previous month, with the majority still remaining in the pessimistic range.

Along these lines, the low expectation over a three-month horizon reveals the fear of what may happen in the summer of 2024, for which the probability that El Niño will be of strong intensity has been rising.

A reflection of this is what was said by Luis Felipe Castellanos, CEO of Intercorp, who in a call to his investors expressed that “the market’s expectations for a rapid economic recovery have faded,” according to Bloomberg.

Downward inflation

On the other hand, The BCRP highlighted that inflation has been reducing at an even greater rate than expected, which has led the monetary entity to reduce its reference interest rate by 25 basis points for the third consecutive month, now standing at 7.00%, which is the lowest among the countries. large in the region.

However, they are still attentive to the effects that El Niño may bring in order to make monetary policy decisions.

Likewise, they expect the 12-month inflation rate, currently at 4.34%, to return to the target range of between 1% and 3% between March and April 2024.

“Inflation would be reaching the target range towards the months of March and April, we maintain that as a base scenario because we also remember that inflation in the month of October has been falling faster than expected,” stated the BCRP representative.

Plan Unidos seeks to increase potential GDP, highlights Armas

The economic recovery plan, called Unidos, has been well regarded by the BCRP, since it considers that the announced measures aim to raise the GDP Peru’s potential and to recover business confidence that has deteriorated in recent months.

“The measures that aim to increase and unlock investment are fundamental, not only because they will generate jobs and reactivate the economy, but they also increase the potential GDP and this helps to recover the business confidence that has been lost.” kept low for a long time,” Armas asserted.

The impact of the plan It will depend on the speed at which the measures are implementedthey noted.

The word

Adrián Armas, central manager of Economic Studies of the BCRP

“With recent information, possibly in the third quarter we will have a negative growth rate again. The El Niño shocks, above all, have had a major impact on the economy.”