Central Bank: GDP would have grown 2.7% in the first half of the year

The Central Reserve Bank of Peru (BCRP) estimates that the economy will end this year at 3.1%, and this journey—which has an upward bias—seems auspicious. The Ministry of Economy and Finance (MEF) shares this projection.

In May alone, GDP is believed to have grown by around 5%, driven by the strong recovery of the primary sector, specifically fishing: +158% thanks to the dissipation of climatic anomalies such as El Niño which, 12 months ago, interrupted the anchovy fishing season. The specific data for the fifth month of 2024 will be known this Monday, July 15.

Adrián Armas, Central Manager of Economic Studies at the BCRP, estimates that primary GDP —which also includes the agricultural, metal mining, hydrocarbon and manufacturing sectors— rose 13%.

Along these lines, it should be noted that in the first quarter the economy varied by 1.4% after a 2023 with all these periods in negative – which translated into 0.6%, the deepest fall in three decades without the pandemic – and the second quarter would have approached 4%, leaving a first semester with a GDP rate of 2.7%.

“Non-primary GDP is expected to continue to rise in the second half of the year, supported by spending,” Armas told reporters.

It is worth noting that the non-primary sector includes manufacturing, electricity and water, construction, trade and services; and here, Armas emphasizes that private consumption will play a key role: there is more money in circulation.

“Private consumption closed 2023 at just 0.1% due to adverse shocks to the economy. We are now seeing a recovery in the population’s purchasing power,” he summed up. For this year, private consumption is expected to rebound to 2.8%, after 12 months in which it fell to levels not seen since the late 1990s.

According to data from the BCRP, the formal wage bill has recovered and registered a real year-on-year variation of 7.1% in the second quarter, far from the 2.0% of the first quarter: a symptom that there is more formal employment and thus “greater demand for goods and services” is being created —added Armas—.

What do other fronts of the economy expect?

Together with the BCRP, the MEF forecasts a GDP growth rate of 3.1% at the end of this year, while entities such as Citi Research project a rate of 2.4%, far from our potential. In Citi’s opinion, the political noise is holding back investors and they are surprised that a president with a low approval rating of just 5% is still in power. The International Monetary Fund (IMF) estimates a rate of 2.5% and the IPE raised it from 2.4% to 3%.

Advances in mining investment

● Private investment closed in negative territory in 2022 and 2023 (-0.5% and -7.3%, respectively) and in the mining sub-chapter, too: -7.8% and -10.2%. The rebound for 2024 is limited: 2.3% for total private investment and 6.4% for mining.
● Armas acknowledges that there is “progress” in mining investment and hopes that the dynamism will continue for the second half of the year.
● As reported by La República, the start of operations in Tía María (Arequipa) is the spearhead for the unblocking of projects such as Antamina, Zafranal, Toromocho II Expansion, Corani and San Gabriel.