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Panorama económico

30/06/2020

Amidst a fragile economic recovery

Over the past two months, we have observed several signs suggesting that the global and local economy have begun to recover gradually. This positive news is mainly explained by the beginning of economic reopening processes. This recovery, however, is “fragile”, as there are many risks that could slow it down.

First, the recent upsurge of COVID-19 cases in some parts of the world (such as the U.S. and China) could dampen the recovery of the global economy, as new restrictions to productive activities are adopted. A widespread setback in the economic reopening process would reduce the demand for Peruvian exports, affect economic growth prospects, and could trigger an outflow of capital from Peru.

In second place, on the local front, significant political risks could seriously affect economic growth in the upcoming months and even years. As a matter of example, the draft law seeking to suspend interest payments to financial entities, and the high level of rejection of “perfect suspension of labor” requests could trigger the bankruptcy of companies and generate significant drops in formal employment. This is added to the fact that social unrest has increased dramatically, further increasing the risk of a populist candidate being elected president in 2021. The anticipation of this risk could generate further drops in business confidence and reduce this year’s private investment even more.

In third place, the slow execution of public spending could affect the recovery of aggregate demand, which could grow less that expected. The government’s bet to accelerate public spending focuses, as of now, on the “Arranca Peru” program and the application of the Government to Government (G2G) mechanism to the Reconstruction with Changes program (RwC). However, there are numerous factors that could limit progress in these programs in the remainder of the year.

Finally, it is important to recall that the risk of the intensification of the health crisis in Peru persists, and that this could hinder the process of economic reopening. In conclusion, looking forward, the speed of economic recovery is still very uncertain. A quick economic recovery will need the government to be effective in stopping unfavorable regulations and accelerating public spending.

OUR PERSPECTIVE

Sondeo SAE

De acuerdo con el sondeo empresarial realizado durante la semana del 12 al 16 de octubre a los clientes del SAE, siete de cada diez ejecutivos califica al riesgo regulatorio desde el Congreso con el máximo grado de preocupación para la toma de decisiones de inversión en sus organizaciones empresariales en los próximos 12 meses.

Panorama fiscal

La crisis ocasionada por el COVID-19 generará un severo deterioro de las cuentas fiscales en el Perú. Si no se implementan medidas, el incremento de la deuda pública sería insostenible. Si se implementan algunas medidas tributarias, se podría estabilizar la deuda pública alrededor de 40% del PBI. Aún hay espacio para generar mejoras adicionales y estabilizar la deuda pública en el límite legal de 30% del PBI.

Economic outlook

Economic recovery continued to lose impulse in September. However, in September there were some positive signs on the economic and public health fronts. The above is positive news, but it is still too soon to expect an acceleration of economic recovery towards the end of the year.

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