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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Partner and Principal Economist
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.
