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Economic growth slows down in March
…
In March, the economy expanded by just 1.6% compared to the same month
last year. Thus, gross domestic product (GDP) grew at an annual rate of
3.0% in the first quarter, according to preliminary figures from the
National Statistical Office (INEI), a notch above the 2.9% forecast in the
last edition of the Consensus Forecast.
… amid
declining manufacturing …
In the third month of the year, the pace of economic growth slowed down
considerably compared to the growth rates observed in the first two months
of the year, amid slower growth in manufacturing, construction and
commerce. It should be noted, however, that part of the slowdown is the
result of a statistical effect of less working days in March, as Easter
this year was in March instead of April. On seasonal adjusted basis, the
economy added 1.2% over the previous month. The annual slowdown in the
manufacturing industry was the main driver behind the March performance.
The reason behind the slump is mainly a lack of input from the fishing
sector, which is suffering from the persistence of an anchovies fishing
ban. Anchovies account for almost half of the total fishing activity and
serve as an important manufacturing input. In March, fishing output was
23.9% below the output registered in the same month last year. For the
first quarter, fishing activity declined 22.1%. The protracted lack of
input has severely affected primary manufacturing, which dropped 8.3% in
March, almost twice the contraction registered in February. Performance of
non-primary manufacturing also deteriorated as the sector switched from
positive growth in February into negative territory (-3.2% in March on an
annual basis). The slowdown was most pronounced in the machinery and
electric appliances, which lost 28.0% compared to the same month last year.
… slower
growth in construction
More surprising than the contraction in manufacturing is the slowdown
observed in the construction sector. The construction sector is in the
midst of a recovery from a three-year long recession, which had left the
sector in shatters. Renewed public works projects, in the wake of the
Toledo administration’s attempts to live up to ambitious campaign promises
to lower unemployment, had prompted a jump to double-digit growth rates in
the past months. Now, in March, however, the growth rate slowed sharply to
2.6%. The deceleration is, in part, due to statistical methodology
employed by INEI. Furthermore, according to INEI, physical progress in
construction continues to be strong, as the decline in the growth rate is
mainly due to lower cement consumption, which accounts for more than 90%
in the measurement of construction activity.
Mining
continues to propel economy but Antamina effect will subside by mid year
On a positive note, mining has begun to expand at a very strong pace once
again, following a “dip” in the growth rate in February. In March, mining
activities expanded by 23.8% over the same month last year, as the
comparison with 2001 is favoured by the fact that the Antamina copper-zinc
mine did not start ramping up production until mid-year. So far, the year-on-year
surge in mining has served to bolster the economy’s overall performance.
Without the impact from the mining industry, growth would have been barely
positive in March, as mining accounted for almost 80% of the overall
performance. Once the Antamina growth effect subsides – which will begin
to occur as of July this year – it will be much more difficult to maintain
the economy on the favourable growth trajectory observed since August last
year. However, the subsiding impact from mining should be compensated for
by a pick-up of global demand, which most analysts see occurring in the
second half this year. Important to note, however, is that the positive
impact from the anticipated pick-up in global demand could still be
thwarted by the impact of the weather phenonmenon El Niño, which threatens
Peru this year. On 9 May, the Climate Prediction Center of the US National
Oceanic and Atmospheric Administration (NOAA) warned of a gradual warming
over the next several months with weak-to-moderate El Niño conditions by
the end of 2002. However, the Center also notes that a weak or moderate El
Niño would feature considerably weaker global impacts than were
experienced during the very strong 1997-98 El Niño. With these prospects
in mind virtually all panellists have maintained their economic growth
projections for this year unchanged.
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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