The political environment in February was marked by the revelation of alleged cases of corruption in the presidential circle and by the swearing in of two Cabinets in less than two weeks.
In the first few months of the year, the limited impact from the third wave of COVID-19 infections has enabled the sectors that had been lagging behind to experience a rebound. As a matter of fact, we estimate that an important part of the growth of the first few months of the year will be explained by this “rebound” in the sales in retail and some services.
In the first month of the year, successive crises have continued to drastically deteriorate the image and credibility of the Executive. The resignation of Prime Minister Mirtha Vásquez deepened the crisis within a Government that was already facing a series of challenges.
The political environment in February was marked by the revelation of alleged cases of corruption in the presidential environment and by the swearing-in of two cabinets in less than two weeks. Although these corruption scandals have reinforced a series of political control actions from Congress, the risk of a disruptive scenario remains low in the short term. Although the legitimacy of the presidential vacancy, currently promoted by the opposition, is increasing, to date there are not the 87 votes necessary to remove President Castillo from office. Consequently, it is most likely that we will continue in a scenario of prolonged mediocrity, in which institutional deterioration, slow decision-making and uncertainty prevail.
In recent months, a large part of the jobs created have been low-productivity and low-paying jobs. This is explained by the fact that the confidence of companies remains very shaken, which limits the recovery in the hiring of people in suitable jobs of higher quality. As a result, the deterioration of labor income, added to the strong increase in prices, keeps income adjusted for inflation at a historically low level, which, in turn, limits the consumption capacity of households.
Despite the recovery of the GDP, there are still no significant improvements in consumer confidence, at the aggregate level. This is explained by the decline in real income, caused by the precariousness of employment and the increase in inflation. However, the decrease in the number of COVID-19 cases and the lifting of mobility restrictions in the last month have benefited some economic sectors, such as hotels, restaurants and recreational activities. This improvement already seems to be benefiting some population groups, such as young people, who have been the most affected by the crisis.
We believe that, in addition to reestablishing fiscal institutions, the MEF's agenda should be oriented towards four main objectives: (i) boost spending on public investment, (ii) increase revenue in the medium term in an efficient and sustainable manner, (iii) recover the fiscal savings that have made it possible to face the latest economic crises without liquidity restrictions and (iv) implement policies that promote long-term growth through the promotion of investment and the creation of quality employment.
According to forecasts by APOYO Consultoría, modern retail sales will remain at levels similar to 2021 (1% drop), but they will be almost 11% above pre-pandemic levels. Department store sales will have the best performance in line with the greater mobility of the population and the recovery of the household budget allocated to this segment. In contrast, self-service and homecenter sales will fall in 2022.
So far in 2021, internet penetration and data consumption has accelerated substantially. The longer time spent at home allowed the gap between mobile and fixed internet penetration to continue to narrow since the pandemic broke out. Towards 2022, our forecasts indicate that there is some room for much more limited growth rates due to: (i) the normalization of demand given to the partial return to face-to-face work; (ii) certain caution in business investment decisions at the corporate level, added to the more pronounced financial deterioration in the mypes segment; and (iii) a weak recovery in the purchasing power of households in a context in which other spending categories - limited during the pandemic - are beginning to reactivate and compete for the consumer's pocket.
PERU AT 200 YEARS OLD: THE NEED TO ESTABLISH ITS DIRECTION
Business challenges in a more complex world
After an unprecedented global crisis and on the eve of a general election, Peru is facing a difficult year with many challenges to overcome. APOYO Consultoría presented an agenda which will helped businesses understand the prospects of politics, economy and business opportunities for the next three years.
The event took place September 8, 9, 10, 15, 16 and 17, 2020.
En entrevista con Gestión, Hugo Santa María, socio y economista jefe de APOYO Consultoría, comentó sobre las expectativas para la economía en lo que resta del año y de cara al 2022; así como de la relación Congreso - Ejecutivo.
