This month, the political outlook remained relatively stable despite a decrease in President Boluarte's approval rating. Inspite of her low popularity, the appointment of persons with technical profiles in some ministries, fatigue after almost three months of protests, and closer ties to the center-right in Congress have allowed the President to remain in office.
Enero estuvo marcado por la intensificación de la violencia a nivel nacional, especialmente en el sur del país. La diversidad de actores y de intereses ha dificultado que el Gobierno logre identificar interlocutores válidos para entablar el diálogo; además, en el Congreso no se han alcanzado consensos para aprobar el adelanto de elecciones y con ello establecer una salida a la crisis política.
During 2023, economic growth will be sustained by two specific drivers: i) mining production (in line with Quellaveco's first full year of commercial operation) and ii) the recovery of tourism, especially the arrival of international tourists. However, the escalation of protest violence at the local level is the most relevant risk to the business environment and may affect the prospects of these two growth engines. In fact, GDP growth could be lower by at least 0.5 p.p. than in the baseline scenario (2.2%).
This is because, first of all, 2023 would be another year with inflation above 5%. The lower production of traditional agriculture, the transfer of the accumulated increase in input costs to final prices and the prices of some services that will continue to rise will keep inflation high for much of the year. Second, the labor market would be much less dynamic in a context of low economic growth and electoral uncertainty, where the risk of new waves of social upheaval will remain latent. Thus, in 2023, we expect lower employment growth compared to 2022 and wage growth that will not compensate for high inflation, so purchasing power would remain stagnant.
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.
For 2023, in a context of low economic growth caused by the exhaustion of the post-pandemic rebound, low confidence to invest and an adverse international environment, a marked slowdown in employment growth is projected compared to 2022 and wage growth that will not would offset high inflation. This would keep the economic perspectives of families in pessimistic territory and the upward pressures on wages.
2Q2022 results were weaker than expected, due to high inflation. On the one hand, the recovery of physical store operations allowed a 15% growth in sales in nominal terms (+7% real) in department stores. Then, due to the strong increase in food prices, self-services grew 9% in nominal terms (+2% real), driven by cheaper store formats. Finally, the homecenter segment grew by almost 9% in nominal terms (+1% in real terms), influenced by the increase in prices of construction finishes and the greater attendance.
