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Fiscal deficit set to rise moderately in the wake
of new administration’s plans to jump-start economy. The
Peruvian tax agency Sunat (Superintendencia Nacional de Administración
Tributaria) reported that central government revenue reached 1.795 billion
Soles (US$ 512 million) in June. While revenues increased 2.5% nominally
over June last year (in real terms flat) inflows are down 11.3% over May.
June tax collections rose 3.8% in US$ terms amid stronger income taxes.
Customs revenue, on the other hand, fell 6.1% as weaker domestic demand
reduced the level of imports. Income from other state entities also
dropped. In the first half this year, government revenue rose 6.2%
nominally (2.6% in US$ terms) to 12.0 billion Soles (US$ 3.4 billion)
compared to 11.3 billion Soles (US$ 3.3 billion) in the same period last
year. The incoming administration expects the fiscal deficit to reach
1.6% of GDP given the current spending programme. The current Economy
Minister, Javier Silva Ruete affirmed that the current extra expenditures
to help the southern part of Peru, which suffered from an earthquake on 23
June, would not raise the fiscal deficit owing to budget restructuring.
Assuming that Toledo secures support for the fiscal spending programme
proposed by his party, Perú Posible, the deficit would reach 2.2% of GDP,
according to Toledo’s economic team. The higher fiscal deficit figure
would necessitate a renegotiation of the 1.5% of GDP fiscal deficit target
agreed to with the International Monetary Fund (IMF) in March this year.
The Consensus confides in the pledges made by Toledo made during his
campaign not to rely on excessive public spending to revive the ailing
economy. In fact, the Consensus expects the fiscal deficit to narrow next
year.
Sluggish demand lowers inflation.
In June, consumer prices dropped 0.06%. The price drop was caused by
lower prices for food and beverages, which registered a 0.28% decline over
May. As a result, annual inflation fell from 2.6% in May to 2.5% in
June. While part of the price declines in food were prompted by abundant
supply amid favourable climatic conditions, it also reflects scarce
demand, according to the National Statistical Office (INEI), as consumers
act cautiously in the light of the current economic slump. Panellists
have pared their year-end inflation forecasts yet another 0.2 percentage
points. Despite the Toledo announcement to revive the economy, panellists
have also cut a notch from last month’s inflation forecast for 2002.
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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