Increasing current account deficit.  In the second quarter, the current account deficit reached US$ 534 million, US$ 42 million higher than in the same period last year before and US$ 117 million above the previous quarter.  According to the Central Bank, the second quarter deficit was equivalent to 3.8% of GDP.  Net capital inflows of US$ 424 million were not sufficient to cover the gap in the current account.   Accordingly, the international reserves declined US$ 96 million in the second quarter. 

Lower trade deficit in Q2.  The trade balance deficit decreased to US$ 172 million in the second quarter from US$ 200 million for the same period 1999.  In June, the deficit dropped to US$ 18.7 million, the lowest level since August 1999, confirming the trend of strong export growth this year.  Exports (+32.2% year-over-year) have been favoured by a surge in mining, which profited from higher copper prices, and by booming textile and chemical exports amid recovering global demand.  Imports increased by 19.5% over June 1999, driven by a 75.7% increase in fuel imports and a 25.7% surge in intermediate goods for the industry.  Consumer goods, on the other hand, contracted by 0.2%, due to sluggish demand for non-durable consumer goods. 

Mounting fiscal deficit.  In the second quarter, the overall deficit of the non-financial public sector reached 2.5% of GDP, compared to 2.3% of GDP in the same period last year.  Even though current revenues increased from 13.8% of GDP to 14.3% of GDP, non-financial expenditures increased from 14.4 to 14.8% of GDP.  The government’s draft bill for the 2001 Budget was sent to Congress last month and indicates that the government expects to incur a deficit of 1.4% of GDP.  

Note:  The above text is an abridged version of the LatinFocus Consensus Forecast briefing on Peru and includes information available up to 10 September 2000.  For more details please click here.

For five-year forecasts, please click here.