2H2022: Marked moderation of the economic growth rate
There are three recent dynamics that are defining the business environment. First, mining production has continued its downward trend in 2Q2022. Second, the purchasing power of the majority of families has deteriorated. Third, investment has been affected by the high political insecurity and the deterioration of public management. All of this has caused economic activity in Peru to contract in 2Q2022 in comparison to 1Q2022, though in year-on-year terms the growth rate has only decelerated slightly (from 3.8% down to 3.5%).
Despite this context, there are some segments of the economy that show dynamism. For example, sales in the export sector grew by 20% in the first four months of the year. Likewise, private consumption has grown by around 4% in 2Q2022, boosted by the post-COVID rebound and the recovery of labor income in the formal labor market.
Unfortunately, these engines will not be enough to generate more dynamism at an aggregate level. What is more, some of the factors that affected the economic growth rate in 1H2022, such as elevated inflation and caution in the private sector, will most likely persist throughout the rest of the year and, in addition, the factors that sustained growth will likely disappear moving forward. In particular, it’s likely that the formal labor market will cool down over the next few months and that there will be less international momentum. That’s why we expect that year-on-year GDP growth will moderate noticeably in the second half of the year (from 3.7% in 1H2022 down to 1.4% in 2H2022).
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José Carlos Saavedra
Partner and Principal Economist