Published on Wednesday, March 15, 2023

Peru | Activity starts the year in negative territory

GDP contracted 1.1% YoY in January. Non-primary GDP contracted in a context of social upheaval and unfavorable conditions for private spending. On the other hand, the primary component of GDP moderated due to lower mining production.

Key points

  • Key points:
  • Non-primary GDP contracted in a context of social conflict and in which the conditions for private spending are less favourable. As a result, the fall in the construction sector and some branches of the services sector stands out, as well as the moderation in growth in the commerce sector.
  • Primary GDP moderated due to the drop in mining production, which was affected by the blockade in the southern mining corridor.
  • The contraction of 1.1% year-on-year in January is consistent, according to the INEI, with a contraction of 1.4% in month-on-month terms (corrected for seasonality). It is important to note that seasonally adjusted GDP has been contracting consecutively since October 2022.
  • Indicators available for February suggest, on balance, that in year-on-year terms growth for that month will be somewhat better than that of January. For the remainder of the year, the environment will be challenging. Although global growth prospects have improved, the local environment is less and less favourable: business confidence remains in negative territory and social unrest has tended to lessen in recent days, but uncertainty remains with respect to an early presidential election. To this must be added the economic cost of the intense rains that have been plaguing the country. These elements add a significant downward bias to our growth forecast for the economy this year (currently at 2.5%), which we will update next week.

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