Peru Economic Outlook. Third quarter 2019

We estimate output growth for 1H19 around 2%YoY, accelerating to roughly 4% in 2H19. As a result, Peru’s GDP will grow 2,9% in 2019, one percentage point less than our previous estimate from three months ago. For 2020, we anticipate growth will approach 4%.

Key points

• Key points:
• Global growth will stabilise at lower levels compared to previous years. Additional economic stimuli, mainly monetary, will offset the negative effects of trade tensions
• Domestic economic activity did not recover in 2Q19. The weakness observed so far this year is a result of transitory shocks to extractive sectors such as mining and fishing, and to public investment. Private spending indicators have softened as well
• We forecast a pickup in economic activity in 2H19, led by the recovery of extractive sectors and public investment. Thus, 2019 growth would be 2,9%. For 2020 we expect a growth rate somewhat below 4% due to the statistical rebound in primary sectors and a greater contribution from public spending
• Given the context of deteriorated business confidence, moderation in private spending indicators, bounded inflationary pressures, and the relative strength of the domestic currency, we anticipate a preemptive cut in the monetary policy rate in the third quarter, from 2,75% to 2,50%

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