New risks on the horizon
May saw an increase in concerns about global growth decelerating even further, for three main reasons.
First, strict lockdowns, as part of its Covid-zero strategy, have strongly affected China’s growth rate. Second, central banks in developed economies have adopted more aggressive positions in terms of the withdrawal of their monetary stimuli, in the face of high inflation. Third, the Russian invasion of Ukraine continues to damage business and consumer confidence in the Eurozone, which could result in lower-than-expected economic growth.
On the local level, the risk that inflation will be more persistent than anticipated increased this month. The continuation of the armed conflict in Ukraine has kept prices of agricultural commodities, oil and fertilizers at high levels. This could generate additional pressures on food prices over the next few months, as a result of which inflation could normalize at a lower pace than anticipated.
This increased concern about a deceleration of the global economy and national inflation has increased the risk of lower growth of the Peruvian economy in 2022 and a slower recovery of families’ financial situations. Thus, it is necessary for the government to take targeted, timely and temporary measures, such as relief payments for vulnerable families, who are not benefiting from measures approved between April and May.
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Pablo del Águila
Jefe de Investigación