Private investment fell for the fourth consecutive quarter

Private investment has already been in free fall for a year in the Peru. The Central Reserve Bank (BCRP) confirmed this week that, in June, the four consecutive quarters of decline of the purchases of fixed assets or equipment made by companies in our country, a panorama that, according to the highest issuing entity, shows the “low level of confidence” generated by our economy.

In detail, private investment decreased 8.3% in the second quarter of 2023 compared to the same period of the previous year, after a crushing 12% drop in the initial quarter. The result is also reflected in the meager progress of imports, which fell 3% and recorded its second consecutive quarter of decline.

However, the Ministry of Economy and Finance (MEF) sees the glass half full and, in addition to rejecting the arrival of a technical recession, highlights the four-point advance after the social conflicts and climatic events that occurred at the beginning of this fiscal year.

“The drop in the first quarter, which was 12%, is being reversed to 8% in June. We hope that, going forward, investment will continue to improve in this environment of recovery of confidence. That is the bet of this management: advance in the closing of gaps, but always maintaining fiscal balances”, asserted the head of the MEF, Alex Contreras, during the awarding of five electrical projects in charge of Proinvestment.

In contrast, public investment recovered from its 1.2% drop and advanced 3.1% in the April-May-June period, for which reason consumption in this sector also went from -5.9% to 2, 7%.

private consumption is low

But private consumption is not rising either, and went from a bare 0.2% to 0.4%, quite far from the 4.6% recorded in the comparison period.

The director of Phase Consultores, Juan Carlos Odarwarns that, between the fourth quarter of 2022 and the second of 2023, this indicator has grown at an annualized rate of only 0.32%, the slowest rate recorded in the last 23 years, discounting the pandemic.

For the economist and former head of Sunat Luis Arias Minaya, the short advance is translated as a “rickety growth” of consumption. In this sense, it also anticipates that the public investment goals of the MEF will close far from 6% this year, something that would weigh heavily on the growth figures.

“Using the seasonally adjusted GDP, as of June 2023 we are below September 2022, the month before the start of the recession,” he warned.

Exports show an improvement at the end of June

Peruvian exports did show good progress in the second quarter of 2023: they went from 2.4% growth at the beginning of the year to a strong 7.7%, according to the BCRP, which prevented the contraction in June from being more serious .

Between January and June, the construction sector fell by 9% after accumulating six consecutive negative figures. The month with the worst performance for this economic activity was May, with a 12.3% drop.

Proinversion awarded the projects Link 500 KV San José – Yarabamba, Link 220 KV in Piura Nueva – Colán, Link 220 KV Belaúnde Terry – Tarapoto, ITC in Lambayeque north and Substation Piura east. With these five, there are already 12 plans assigned by the agency this year, with an amount close to US$1.3 billion. It is expected to have the port of marcona and the Ancon Industrial Park until December.

The word

Approach. Luis Arias Minaya, economist.

“Worrying data from the BCRP in the second quarter. Consumption has a rickety growth, while private investment has four consecutive quarters of decline and the public does not grow enough. The Government must recognize the recession and have an exit plan”.