Julio Velarde: “Private investment remains extremely strong”

As every three months, the Central Reserve Bank of Peru (BCRP) yesterday updated its projections on economic activity and maintained its growth estimates for Gross Domestic Product (GDP) for this year at 3.4% and 3.2% for 2023.

However, the monetary entity warned that the figures given are with a greater degree of uncertainty as a result of the conflict between Russia and Ukraine.

Julio Velardepresident of the Central Reserve Bank of Peru (BCRP), pointed out that, in January of this year, economic activity was at 2.4% above previous levels and would be in positive territory during the months.

“February is going to surprise with a greater recovery of the product, even at fairly high rates that may be between 5% and 6% and, for March, although we are having negative effects associated with mining conflicts, we also expect that the other indicators will continue to be positive; It’s not going to be that bad,” Velarde pointed out during the presentation of the March inflation report.

As far as private consumption is concerned, the BCRP raised its forecast from 4% to 4.1% for this year.

strong investment

Although the projection on private investment remained at 0% for this year, the banker specified that this result does not mean that there is no investment in the country.

Along these lines, the head of the Central Bank was emphatic and expressed that private investment for this year would amount to US$48,000 million, an amount similar to that registered in 2021 and which exceeds pre-pandemic levels.

“Private investment is still extremely strong, even if one compares it to 2019 it is growing by almost 15% (…) Many times one has the impression that when one says 0% growth it means that there is no investment, what what happens is that it is not growing compared to the previous level”, Velarde clarified.

Disaggregating the data from the total private investmentmining is expected to have a drop of -0.8% (US$ 5,500 million) and non-mining is expected to have a marginal growth of 0.1% (US$ 43,272 million).

For next year it is estimated that private investment will grow 2%. Although at a disaggregated level, mining investment is projected to fall by -15% and non-mining investment to expand by 4.1%.

As far as public investment is concerned, the BCRP It reduced its forecast from 4.5% to 4% for this year, due to the lower execution carried out in the first months of 2022.

The projection that the monetary entity did have to revise was the one related to inflation, since the current international context has caused prices to rise.

Thus, inflation is expected to close 2022 at 3.6%, above the target range of the BCRPwhich is between 1% and 3%.

However, this forecast in inflation has an upward bias, since there could be an increase in international food and fuel prices due to production and supply problems.

Another potential risk is the persistence of global inflation and its potential impact on inflation expectations and global economic growth.

Meanwhile, for 2023, inflation is estimated to be 2.1%, returning to the target range in the first semester, in a context of progressive closing of the gap as a result of the reversal of the effect of transitory factors on the interest rate. inflation.

Exchange rate rose and closed the week at S/ 3.78

In its last exchange session of the week, the exchange rate closed higher and stood at S/ 3.7809, an increase of 0.82% compared to the close of the day before, when it reached S/ 3.7500, according to reported the BCRP.

Alexander XavierForeign Exchange Trader of Renta4 SAB, pointed out that the evolution of the dollar occurs in a situation that is framed in the pardon of former president Alberto Fujimori, added to the demand of local banks, which caused the monetary entity to intervene with papers and in the spot.

According to BCRPAs of March 14 of this year, the entity offered US$ 1,100 million in the foreign exchange market through sales in the spot market and net placement of foreign exchange derivatives and BCRP CDs.