After contracting by 11.1% during 2020, for this year the economy is expected to have growth –consensual between Central Reserve Bank of Peru (BCRP) and the Ministry of Economy and Finance (MEF)– slightly higher than 13%.
And by 2022 the GDP is expected to oscillate between 3.2% and 4.8%, a higher average not seen since 2013.
“We received the economy after a downturn last year, but this 13% rebound is extremely significant. There are few countries in Latin America that have achieved a rebound as important as this one, ”said the Minister of Economy, Pedro Francke, on the eve.
In this regard, the economist and former head of Banco de la Nación Luis Arias Minaya points out that the rebound effect is explained by the good behavior of the global economy and by the successful vaccination process, which has allowed that until now, a third wave has not developed in our country that forces activities to be paralyzed, as at the beginning of this year.
Not everything is rebound
A couple of days ago, Pedro Francke made a balance of economic activity during his tenure, and stated that private investment would close 2021 with a growth of 34.5%, thus achieving a rebound of 12.2% above the levels prior to the COVID-19.
“Private investment this year is growing 34.5%. It is true that in 2020 it fell 16.5%, but it is growing 34%. That is not a rebound, 34% is more than double that of 16% “, he said (see infographic).
Likewise, Francke Ballvé highlighted that public investment achieved a record of S / 31,761 million, an amount 22.2% higher than the S / 20,615 million executed in 2020.
“The public investment carried out this year will be the largest we have ever had in Peru,” he stressed.
Watch out for slowdown
On the other hand, it is necessary to specify that the BCRP estimates that private investment will grow 0% by 2022, adding to this the lower business expectations.
“Some have believed that the Central Bank is saying that the investment will be 0%, and that is absurd. It would not be zero when mining investment, still important, grows at 3.4% basically due to Quellaveco and non-mining investment, contracting slightly by 0.4% ”, he argued Julio Velarde, president of the BCRP, a week ago during the presentation of the Inflation Report for December.
In this regard, Arias Minaya emphasizes that it is also important to see “the projections that fell short.”
In this sense, as a slowdown in private investment is projected for the third year of the pandemic, it recommends that the Government of Pedro Castillo should give positive signals, such as the immediate dismissal of a constituent assembly, as well as “any type of rule breaking regarding to contracts ”.
And, as for the forecasts of public investment for the coming year, the BCRP expects it to grow 4.5% thanks to higher spending on reconstruction works under the Government-to-Government Agreement and the projects of the National Infrastructure Plan for Competitiveness (PNIC).
Don’t trust the tailwinds
Former Minister of Economy Alonso Segura recognizes that Peru has a very strong enormous drive for its economic performance for 2022; however, there are domestic factors that can hinder the estimates.
“There is still a very strong external impulse. Inflation is a problem, but the prices of raw materials are very high, and that always helps a lot to Peruvian stability ”, summarized.
It also details that the solidity of raw materials and global growth embody “very strong tailwinds”, but if the Government continues without reversing its course with decisions and questioned ministerial appointments, the growth path will slow down and it will not be passed. 3%, aggravated by private investment, which may end up negative, he pointed out.
The former official questions that policies have not been developed that aim to accelerate higher growth in the long term or to improve the efficiency of the markets for goods or extractors.
“It is happening that, from the Congress with allies of the Government, they are repealed and they are backtracking in reforms. See Education and Transportation. They are doing counter-reforms and going like the crab, “he said.
In short, Segura considers that fiscal policy is in danger given that the Executive has only opted for bonds and subsidies, without targeting or intention to improve spending efficiency, and argues that “when the tailwind subsides, the fiscal irresponsibility ”.
Shelling the job
As of October of this year, formal employment at the national level registered a positive variation of 2.2% compared to the year prior to the pandemic.
Francke maintains that “the gap has been passed and we are positive”, but acknowledges that it is insufficient, since formal employment is expected to grow between 5% and 6% annually. “The trend is clearly upward (…) but we see that this recovery in employment is totally uneven”, manifested.
This is because in sectors such as agriculture and mining there is an evolution of 24.4% and 9.0%, respectively. While in manufacturing and services, there is a contraction of -1.8% and -6.5%, respectively.
In its count, the BCRP clarifies that there are 5 million 532,000 formal jobs that are counted until the tenth month: 3 million 946,000 from the private sector and 1 million 586,000 from the public.
On the other hand, only in metropolitan Lima, the population with adequate employment fell -20.8% (671,100 people), from 3 million 231,700 in 2019 to 2 million 560,600 in 2021, according to the INEI.
In addition, 522,000 more underemployed were registered (30.2%) than in the same period of 2019, going from 1 million 730,200 to 2 million 252,200 today.
In this line, the average income in the quarter is located at S / 1,588.30 and represents a decrease of S / 179.10 compared to 2019. From September to November of this year compared to the one before the pandemic, the mass Salary had a negative variation of 13.6%, now standing at S / 7,524 (S / 8,648 in 2019).
Directed fiscal deficit projection
Pedro Francke, for his part, confirmed that there is no exaggerated spending policy in his portfolio, since he managed to straighten the projection of the fiscal deficit inherited from the transitory government of Francisco Sagasti.
“When the budget for this year was made, it was projected that the fiscal deficit would be 6.2% of the gross domestic product (GDP) and in the end it will be 3%. This government has cut the deficit in half. Talking about excessive spending is not consistent with reality ”, he pointed out.
The holder of the MEF considers that there has been a “fairly conservative and responsible” policy, to the point that Peru will be the Latin American country with the greatest reduction in the fiscal deficit, as well as with a more concrete economic recovery.
And, regarding the expectations of the fiscal deficit for the coming years –after reaching a peak of 8.9% in 2020–, Julio Velarde stated that the BCRP also contemplates a decreasing trend.
Thus, for this year the fiscal deficit would be 3.1%; while for 2022 and 2023, it would be 2.8% and 2.4%, respectively. This evolution would occur due to the recovery of current income and the consolidation of non-financial expenses compared to 2020.
Finally, the MEF recalled that the macro-fiscal strengths allow access to the foreign capital market with a rate of 2.6% – lower than that of neighboring countries -, for which US $ 5.2 billion were placed at low interest rates. .
Data
Margin. According to the BCRP, economic agents project that the exchange rate will close this year at S / 4.04, and for 2022 between S / 4.10 and S / 4.20.
Return. Inflation would reach 2.9% and 2.1% by 2022 and 2023, within the BCRP’s target range, which ranges between 1% and 3%.
X-ray of the Peruvian economy
Reactions
Julio Velarde, president of the BCRP
“Some have believed that the investment will be 0% and that is absurd. It would not be zero when mining investment grows to 3.4% (in 2022) (…) There is still mistrust, not the same as August, but it remains ”.
Alonso Segura, former Minister of Economy
“There is still a very strong external impulse. Inflation is a problem, but the prices of raw materials are very high, and that always helps a lot to Peruvian stability ”.
The factors behind the 13% rise in GDP
Elmer Cuba, partner of Macroconsult
Indeed, the economy will grow 13% compared to last year, but this very strong rebound is explained by three variables: the advance in vaccination, the expansionary programs of the BCRP and the MEF, and, finally, the massive withdrawal of money with the CTS and AFP. This gave families a lot of money at the cost of their unemployment insurance and future pensions, but it boosted consumption.
On the other hand, the expected growth of just over 3% responds to a high tranche. The private ones agree in the majority a figure between 2% and 3% because the factors mentioned above are exhausted. It must be considered that the expectations of private investment are not going well and employment is not recovering its dynamism either. Sooner or later, consumption will slow down and negative private investment will weigh down the economy.
For what is to come, exports will show their face. Basically due to tourism, since this item is going to improve compared to recent years, bringing a growth of between 2.5% and 3% of the economy.
There must be a greater commitment from the Government to private investment. The great fear is changing the rules of the game of the last 30 years, as well as the resolution of conflicts. Las Bambas is too big to stand. Its direct and indirect effects reach almost 2% of GDP. It is a matter of weeks. I don’t think it will stop. Its eventual closure would complicate the economy.
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Kingston is an accomplished author and journalist, known for his in-depth and engaging writing on sports. He currently works as a writer at 247 News Agency, where he has established himself as a respected voice in the sports industry.
