Peru in 2020: Unprecedented crisis and challenges
José Carlos Saavedra, Partner and Principal economist.
The world is suffering the worst
crisis of the past 75 years due to COVID-19, and signs of deteriorating
economies are increasingly evident. On the healthcare front, the exponential
rise of infection cases has collapsed healthcare systems at the global level.
On the economic front, several indicators suggest that the economic activity
has plummeted all around the globe.
In Peru, although there are signs
of a slight flattening of the curve of COVID-19 cases, the more than 40 days of
quarantine have not been enough to contain the virus. In
this line, the government has been forced to extend the mandatory social
distancing measures until May 10.
Given this situation and
considering some key assumptions, APOYO Consultoria
estimates that this year, GDP will fall 10%-12% in real terms, formal
employment will be reduced by 20%, and private investment, by 40%-50%. Because
this is an unprecedented crisis and the level of uncertainty is very high,
economic growth will depend on the evolution of many factors, such as global
economic growth, further extensions of the quarantine, economic measures
carried out by the government, among others.
Up to now, the government’s
economic response have moved in the right direction to mitigate the impact of
this severe crisis. This response has included the granting
of a subsidy to the most vulnerable families, a payroll subsidy, tax and
financial relief for companies, liquidity lines with State guarantees, “perfect
suspension” of work, and the financing of this economic program through
external debt with low rates.
However, there are three important
risks that could limit impact of the government’s measures on economic
that shortcomings in public administration and in the healthcare system will
jeopardize the control of the virus spread and the reopening of the economy,
ii) that social discontent will increase and generate violence, as well as a
wave of populist measures, and iii) that the gradual process of reopening
economic sectors will not be adequate.
Contact us to see the complete report: contactaSAE@apoyoconsultoria.com