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Peru
skirts the trend of global slowdown and actually is seen as recovering from
recession just as its regional peers are heading for a severe nosedive.
However, rather than indicating a broad-based recovery, the upswing is the
result of the start-up of the large Antamina copper-zinc mine, which is
boosting strongly in the all important mining industry. Depressed consumer
prices indicate that domestic demand is not yet out of the woods. |
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Skirting the
trend of the global slowdown
The
Peruvian economy actually seems to be recovering from a nine-month
recession, just at a time when its regional peers are headed for a
nosedive. In September, economic activity increased 2.3% over the same
month last year. The strong reading follows a 0.8% year-over-year
increase in August, which marked the first month of positive growth since
the economy dwindled into recession in November 2000. As in August,
robust annual growth of 22.1% in mining and fuels output drove the
September expansion. The mining sector has profited from the beginning of
commercial production at the Antamina copper-zinc mine located in northern
Peru. The production ramp-up period is four months ahead of schedule and
on 1 October the mine had reached 80% of its designed throughput rate. As
a result, copper production is up 79.3% and zinc output 11.4% over
September 2000. Fishing was at the other end of the growth spectrum,
registering an 8.9% year-over-year decline. The contraction was prompted
by adverse climatic conditions and a ban on anchovy fishing, which
accounts for almost half of total fishing and serves as an important input
in the manufacturing industry.
All sectors improve but
construction still remains mired in recession
Manufacturing increased 0.7% compared to the same month last year,
reverting back to the negative trend observed in the past three months.
The 6.1% increase in raw material-based manufacturing compensated for the
sluggish non-primary manufacturing, which remained in negative territory
for the eighth consecutive month. Even so, the 0.5% retrenchment in
non-primary manufacturing represents a strong improvement over the 5.3%
contraction experienced in August and provides hope for recovery in that
sector. The electricity and water industry also picked up growth,
registering a 3.9% expansion. The construction industry, on the other
hand, remains deeply mired in recession, as it registered yet another drop
of 7.6% over September last year. The strong increase in public sector
works is proving insufficient to compensate for sluggish private sector
construction activity. However, the double-digit contraction rates
registered throughout most of the past year seem to have given way to more
moderate declines. If the government proves successful in providing the
economy with an impetus via its job creation programme, then consumption
should experience an upturn. The job creation programme could serve to
further push wholesale and retail sales, which are exhibiting a clearly
established upside trend over the past four months, culminating in an
annual expansion of 2.2% in September.
The
strong September reading and upward revisions of GDP figures for July
(from -0.8% year-over-year to -0.5%) and August (from +0.7% yoy to +0.8%)
have left the annual variation of third quarter GDP at 0.8%. The
performance was mainly driven by strong mining. However, other sectors
also exhibited positive growth rates albeit still at much reduced levels
(all at 1.0% or below) and only fishing and construction remained in
negative territory in the third quarter. While the third quarter figure
is anything but impressive, it nonetheless represents an end to the streak
of three negative quarters and should serve to inspire some confidence
among the Peruvian businesses and consumers alike. Panellists expect the
economy to recover further in the fourth quarter and growth for the whole
year roughly on target with the government’s forecast. Moreover, the
positive trend is expected to continue throughout the coming year. Growth
for the year is anticipated to remain well below the government’s 4.0%
target. The reason behind the rather positive performance, considering
the current softening of the global economy, is due to the effects of the
increased mining output, which will even increase in the coming months as
the Antamina mine progresses from trial phase to full production.
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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