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In
addition growth in the manufacturing industry deteriorated from 0.1% in
January to a 3.8% contraction in February, indicating a drop-off in
domestic demand. Other sectors also deteriorated over January.
Agriculture declined 0.2% year-over-year (January: +0.2%) and mining
contracted 6.9% (Jan: -4.4%), while electricity added 0.2% (Jan:+4.4%).
Only commerce (Feb:+0.2%; Jan: -1.6) and fishing (Feb: +6.1; Jan:+5.0%),
which profited from favourable climatic conditions, showed some
improvement. The deterioration in February and a more adverse global
environment have prompted panellists to cut this year’s GDP growth
forecast by another 0.1 percentage point. In addition, panellists
have pared their 2002 projection.
Inflation
spikes in March. In March, consumer prices increased
0.51%, more than twice the rate observed in February and significantly
above the trend observed in the past months. The March price
increase was driven mainly by higher food prices and a surge in education
costs. Nevertheless, the annual rate remained unchanged at 3.6%.
In its recently concluded Article IV consultation with the International
Monetary Fund (see below), authorities pledged to reach an inflation rate
of 2.5 to 3.5% this year. Panellists are more sceptical about the
Central Bank’s ability to rein in inflation and expect inflation to
overshoot the upper range of this year's target.
IMF
consultations concluded. On 12 March, Peru concluded the
2000 Article IV consultation with the International Monetary Fund (IMF)
and approved a US$ 162 million one-year Stand-By Arrangement. The
program for 2001 assumes that real GDP will grow between 2 to 3%, a
reduction in the external current account deficit to 2.4% of GDP and a
moderate accumulation of net international reserves that would keep gross
reserves at about nine months of imports. Consistent with Peru's
Fiscal Responsibility Law, the combined public sector deficit would be
reduced to 1.5% of GDP. The growth projection is predicated on a
recovery in the second half of the year, driven by a pick-up in private
demand as uncertainty subsides following the change in government.
However, the IMF expressed concern about recent changes in the tax
structure (for details see LatinFocus Consensus Forecast February 2001)
that did not turn out to be revenue neutral and thus jeopardise current
fiscal deficit targets. Panellists expect the government to
significantly overshoot the target.
Note:
The above text is an abridged version of the LatinFocus Consensus Forecast
briefing on Peru. For more details please click here.
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