Downward adjustments to growth forecasts amid political jitters.  The government has adjusted its growth projections in the light of the political crisis and the lower than expected August production data.  According to various government sources, GDP growth is not expected to reach the 5.0% incorporated in the government planning but should remain above 4.0%.  For 2001, the the Finance Ministry’s expectations were revised down to around 4.0% from 5.5%.

Inflation spikes.  Inflation once again spiked in September.  Consumer prices increased 0.56% over August, taking the annual rate to 3.9% from 3.8% the month before.  The September price increase was the highest increase since May 1999 and was mainly driven by higher fuel prices as the government reduced subsidies and a transportation strike in the second half of the month capped supply.  Central Bank officials have reiterated that they are confident to meet this year’s inflation target of 3.5 to 4.0%.  Panellists are less optimistic and see year-end inflation, unchanged from last month’s forecast.  For 2001, the Consensus expects an inflation rate above the government’s target range of 2.5 to 3.5%. 

Currency weakens.  The Nuevo Sol reacted strongly to the political jitters and weakened from 3.47 on 15 September to 3.51 on 20 September.  Subsequently the currency regained some of the lost ground and closed at 3.50 Nuevos Soles per US$ on 6 October in volatile trading.  Panellists expect the impact of political jitters on the exchange rate to subside towards the end of the year. 

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.