Peruvian economy falls 0.55% in 2023 and the largest decline in 31 years is confirmed

Since 1992 – without taking into account the pandemic – there has not been a decline in national production until 2023, when we closed at -0.55%, confirming the largest drop in 31 years, according to official data from the National Institute of Statistics and Informatics (INEI). Although the distance is great, both years are characterized by having endured the passage of the El Niño phenomenon (see infographic).

Manufacturing (-6.65%), construction (-7.86%), financial (-7.85%), telecommunications (-5.80%), agriculture (-2.91%) and fishing (-19, 75%) were the sectors that most influenced the annual result.

Although manufacturing is not the sector with the steepest declineyes it is the one that contributes the most to the GDP. By subsectors, the primary closed at -2.8%, mainly due to the lower activity of processing and preserving fish, crustaceans and mollusks, caused by the reduced capture of anchovy and other species for the production of fishmeal and fish oil, according to the National Society of Industries (SNI).

Meanwhile, non-primary manufacturing – the one with the highest added value – had a decrease of 8.1% in 2023, caused by the decline in the production of consumer goods with a drop of 7.4%.

Regarding maritime fishing, there was a decrease of 21.78% due to less extraction of species destined for indirect human consumption or industrial use, with a total anchovy catch of 1 million 993,295 tons which, compared to 4 million 040,661 tons in 2022, meant a decrease of 50.67%.

It should be remembered that this month, while the second fishing season was underway, most vessels voluntarily stopped their activities due to the constant presence of juveniles.

On the side of direct human consumption, it increased 3.49%, due to greater availability of resources that are offered frozen such as horse mackerel, mackerel, bonito, mahi mahi, tuna, shark, eel and octopus, which were favored by the warming of the sea. because of El Niño.

On the other hand, mining and hydrocarbons (8.21%), commerce (2.36%), transportation (1.27%), accommodation and restaurants (2.68%), services (0.50%), electricity ( 3.68%), public administration (2.94%) and other services (3.51%) offset the balance.

It should be noted that without the positive contribution of the mining sector, the GDP contraction in 2023 would have been 1.4%, according to the Peruvian Institute of Economics (IPE).

Perspectives

Although the annual result has not been a surprise, in fact, the Central Reserve Bank (BCRP) had projected a fall of 0.50%, the December figure did draw attention, which recorded a fall of 0.76%, when A positive result, although meager, was expected.

According to Juan Carlos Ordar, director of Phase Consultores, although fishing (-51.34%) and its impact on manufacturing (-10.92%) were the ones that had the most impact on the December figure, it above all reflects a “generalized stagnation and vulnerability to relatively strong shocks.”

He thus details that to recover the level of January 2022, the first month of 2024 must mark a rate of 1.8%, which in his opinion is unlikely. “The good thing is that the recovery has already begun. The bad thing is that it is slow and will continue that way,” he maintains.

For his part, the former Minister of Economy Alfredo Thorne is not so optimistic and says that although the January rate will be positive, it will respond to a statistical effect due to the sharp drop in January 2023. “It is time to think about a well-structured program stimulus with the private sector,” he commented in X (Twitter).

For its part, IPE maintains that since December there has been an incipient recovery, since the non-primary sectors linked to domestic demand have recorded an annual growth of 1.4%, the first positive figure after twelve months of consecutive falls.

“This reflects the dissipation of adverse shocks that interrupted activities related to consumption (such as in shops and services) and investment (construction),” they explain.

For the following months the outlook could improve because the climatic anomalies will become normal. In this way, the expectations of the private sector should also be more positive, according to the IPE.

INEI: 3 out of every 10 employees are formal

• In 2023, the formality rate went from 26% to 28.9%, while the informality rate fell from 74% to 71.1%, according to the INEI. That is, 3 out of every 10 workers operate within the legal framework.
• By size, 85.1% of those employed in companies with 1 to 10 workers are informal (mypes), and 46.7% are informal in those with 11 to 50 workers (small companies). The bulk of the formal ones (83.7%) are in large companies.
• Agriculture, fishing and mining (80.3%), manufacturing (62.3%) are those that concentrate the most informal workers.