Economic growth to slow down once
statistical effect from mining subsides
According to preliminary numbers from the National
Statistical Institute (INEI), the Peruvian economy expanded by 5.3% in the
second quarter compared to the same period last year (4.2% yoy in the
first half). The reading is well ahead of the 4.0% growth expected by the
Consensus and also above the 3.0% growth reported for the first quarter.
However, with the statistical effect of the mining industry set to wane in
the third quarter and disappear in the final quarter this year, the second
quarter should have marked a growth peak for the foreseeable future.
Panellists remain sceptical about the government’s ability to provide an
impetus to the economy and expect economic growth to decelerate in the
last two quarters of the current year. The anticipated global recovery
should boost prices and demand for Peru’s principal commodities, which
will help lift economic growth in 2003.
once again in deflationary territory
Peru has once again entered deflationary territory. In July, the Consumer
Price Index for Metropolitan Lima registered an increase of 0.03%. The
price level was pushed upwards by higher rent, fuel and electricity costs
as well as price increases in transport and communications. The upward
spike was compensated for by lower food and beverage prices, which dropped
0.22% over the preceding month. As a result of the virtual price stability
observed in July, annual headline inflation dropped from 0.00% in June to
-0.14% in July, driving the country once again into deflation after only
three months of positive annual consumer price variations. The deflation
is the result of weak domestic demand, as the economic recovery fails to
spread more notably from mining and construction to other sectors.
Consensus Forecast panellists have lowered their year-end inflation
forecast a notch since last month.
collection drops but government confident to fulfil fiscal pledges
In July, the National Tax Authority (SUNAT) collected 1.4 billion soles
(US$ 410 million) in taxes. The amount represents a 5.6% drop in real
terms compared to the same month last year. In part, the decline is due to
statistical effects, since July last year was one of the strongest months
in terms of tax collection, as some one time effects boosted the take.
Taking these effects into account, tax collection actually increased by
1.9% over July 2001. In the first seven months, tax revenues were 1.0%
above the levels observed in the same period last year. However, this
amount is likely to be insufficient to cover the revenue shortfall
resulting from the stalled privatisation process. The government had
planned to for privatisation receipts of US$ 700 million this year but so
far, has only collected US$ 140 million. After the debacle of the failed
privatisation attempt in Arequipa (for details see July edition of the
LatinFocus Consensus Forecast), the government is unlikely to generate
additional income for the remainder of the year. Nevertheless, the new
Finance Minister Javier Silva Ruete claims that the government will keep
the 2.2% of GDP fiscal deficit target for this year, as agreed to with the
International Monetary Fund (IMF). Panellists remain sceptical and expect
the Toledo administration to overshoot the target by 0.3 percentage
points. The Consensus also doubts that the government will keep its
earlier pledge to maintain the fiscal deficit in 2003 below 1.4% of GDP.
In fact, Silva Ruete believes that the IMF has indicated some
“flexibility” in recent talks regarding the fiscal objective, provided
that the deficit remains below the target rate for 2001. This more
accommodating attitude is reflected in the Consensus.
The above text is an abridged version of the LatinFocus Consensus Forecast
briefing on Peru. For more details please click here.