Despite some positive signs in September, economic recovery will remain slow
Economic recovery continued to lose impulse in September. The lower speed of economic recovery observed between August and September, compared with the pace between May and July, was due to two main reasons: a strong fall in labor incomes, and the fact that the activities included in phase 4 of economic reopening were not resumed, causing a standstill in economic reactivation.
However, in September there were some positive signs on the economic and public health fronts.
On the economic front, indicators related to private investment and formal employment improved, as did the prices of mining exports. On the public health front, the number of infection cases and deaths caused by COVID-19 began to descend. In consequence, the government removed the lockdown on Sundays and the focalized quarantine in more than 20 provinces in 9 regions in the country, a measure that could result in a favorable impact on businesses in the commerce and restaurant sectors.
The above is positive news, but it is still too soon to expect an acceleration of economic recovery towards the end of the year. It is most likely that the economic situation of households and of businesses will remain weak, and global uncertainty, high.
In addition, the severe deterioration of the current political environment could affect economic recovery in the upcoming months, in three ways: business confidence could weaken; regulatory risk would remain high; and the macroeconomic fundamentals that make Peru stand out in the region could be jeopardized if a candidate with a populist bias were to win the presidential elections to be held next year.
In brief, in September there was good news for the business environment, but recovery will remain slow in the upcoming months.
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During the 2Q2024, economic growth was driven by the rebound of primary sectors, such as traditional agriculture and fishing, and by higher public spending, supported by an estimated increase of 11% in public wages and 16% in public investment, adjusting for inflation.
During the month of August, attention was focused on the dynamics within Congress. In view of the election of the Board of Directors and the recomposition of the ordinary commissions, numerous movements were recorded in the benches.
Although the implicit alliance between the Executive and the Legislative remains in force, in recent months we have seen a progressive weakening of the Executive.
