World Bank: Peru will grow 2.5%, but mistrust still dominates

After the 0.4% contraction that is forecast for the Peruvian economy in 2023, according to a recent World Bank report, a 2.5% rebound is expected for the current year.

The reasons? The multinational indicates that Greater copper production will allow for “more intense” mining activityand better conditions are also expected that will favor agriculture, fishing and manufacturing.

However, they emphasize that it will be subject to the severity of the climate disasters that hit the region, such as El Niño.

“On the other hand, the reduction of the inflation “anticipates a gradual relaxation of financial conditions, which would have a positive impact on private investment and consumption,” the World Bank commented to La República.

This rate, despite being half the potential we used to have a decade ago, would place us above the average for Latin America and the Caribbean (2.2%), a place we abandoned in the last two years.

Thus, this 2024, the Peru would be better positioned than neighbors like Brazil and Bolivia (1.5%), Chile and Colombia (1.8%) and Ecuador (0.7%). Meanwhile, Argentina (2.7%), Mexico (2.6%) and Paraguay (3.8%) would surpass us.

Obstacles in recovery

The World Bank assures that political uncertainty continues to affect consumers and businessmen, to the point that it hinders the development of investment in projects in the Peruvian market.

It is worth adding that the private investment It had two consecutive negative years: -0.4% and -7.3% in 2022 and 2023, respectively; and for this year it is estimated that it will be 1.8%.

Apart from the prolonged pessimism of business expectations, the BCRP reported that private consumption barely changed 0.2%—its worst figure since 1999—due to the deterioration of income and, consequently, lower spending capacity in households.

Poverty, a critical problem

The World Bank in previous reports has warned that one in three Peruvians is poor due to lack of income and that approximately 60% of homes lack one or more basic services. He notes that these forecasts were given when a weak growth in the economy was projected. GDP in 2023. The 0.4% contraction does not portend a better scenario.

For example, Hugo Perea, chief economist at BBVA Research, commented to this newspaper that a 2% rebound will not be enough to mitigate the advance of poverty, which would have risen to 29% of the population in 2023—barely one point. percentage below 2020—and for this one, at 29.6%.

Risks to which we are subject

Commodity markets could be affected by a worsening of the conflict in Middle East or a slowdown in China’s productive activity, which would deteriorate the prospects of some Latin American and Caribbean countries, the WB added.

And, regarding inflation, they point out that central banks in this part of the world have reacted aggressively to pressures, but most are still far from their target limits. They highlight the Peruvian case along with Brazil and Chile, and reiterate that “the work of monetary entities is not yet finished” and each one acts at different speeds.

Figures

• The Peruvian economy would grow 2.3% in 2025, according to the WB.
• 29% of the Peruvian population would be plunged into poverty by 2023.