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Recovery loses dynamism as
weak fishing activity slows non-primary manufacturing
In
contrast to its regional peers, Peru is exiting a recession, which had
held its grip over the country for nine months up to August 2001.
Bolstered by the inauguration of a new copper-zinc mine, the economy
picked up pace in the following months and expanded by a moderate but
positive 2.2% rate in September and October. In November, the economy
lost its newfound dynamism and expanded at a lower 1.7% rate. The main
reason behind the slowdown in economic growth was a staggering 54.1%
contraction in the fishing sector of the economy. Unfavourable climatic
conditions have forced the majority of fishing enterprises to temporarily
pause their activities, which has led to an over proportional decline in
maritime fishing. While the fishing sector accounts only for a little
share of total GDP, it serves as an important input factor for the
country’s manufacturing sector. Therefore, the plummeting fishing
activity in November triggered a steep decline in non-primary
manufacturing, which dropped by 18.4% compared to the same month in 2001
as activity in fish elaborating industry ground to a halt. Non-primary
manufacturing remained in positive territory. However, the 0.2% annual
growth rate registered in November represents a slowdown from the 0.5%
recorded in October.
Mining continues to act as
locomotive and construction recovers markedly from recession
Growth in mining picked up again to 23.5% following a little dent of
“only” 17.5% growth in October. The recently inaugurated Antamina
copper-zinc mine located in northern Peru is approaching its full
production capacity and has provided for the fifth consecutive month of
double-digit growth rates in the mining sector. The electricity and
water sector expanded by 4.5% over November 2000 as abundant rainfall
supported higher output of the hydroelectric power plants and thus
compensated for lower output of water utilities (-4.6% year-on-year). The
construction industry was the best performing sector in November,
expanding a whopping 8.1%, after it had just the eased out of recession in
October with 0.6% growth. Apart from a brief and modest respite in April,
the sector had been stuck in a downturn for more than a year. The
recovery is due to the reactivation of public works projects but is now
also being accompanied by a pick-up in private sector building activity,
which had been lagging behind in October. The sector’s professional
organisation (Cámara Nacional de Construcción) expects the upward trend to
continue this year and is foreseeing a growth rate of 7.0% in the
construction industry. Meanwhile the development of the commercial sector
is raising concerns. Just as other sectors of the economy are pulling
clear from the protracted recession, growth in commercial activities are
skirting the trend of faster growth and expanded a meagre 0.9% in
November, following 1.6% growth in October and 2.2% growth in September.
Weaker November reading
prompts small downward adjustment to 2001 forecast but optimism is budding
about this year’s prospects
The
unexpected weakening in the November economic growth rate has prompted
panellists to shave off another 0.1 percentage point from their 2001
growth forecast, thus continuing the trend of the past three months of
moderate downward adjustments. In contrast, the downward revisions to the
2002 outlook, which had come to a halt last month have given way to a more
upbeat sentiment about this year’s economic performance, as evidenced by
an 0.1 percentage point upward revision to the expected GDP growth rate.
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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