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Tax take drops in March and
electricity privatization on hold again
In March, total current government revenue reached 1.88 billion soles (US$
543 million). The March reading represents a decline of 9.1% in nominal
terms compared with March 2001. According to data from the national
superintendence for tax administration (Sunat, Superintendencia Nacional
de Administración Tributaria), in the first quarter current government
revenue registered a decline of 7.4% in nominal terms. As a result, the
fiscal deficit reached 1.6% of GDP in the first quarter. With tax revenues
deteriorating and government plans to provide the business community with
further fiscal incentives, the public sector is unlikely to achieve a
fiscal deficit in the target range of 1.9% to 2.2% of GDP, accorded to
with the International Monetary Fund (IMF) for this year. A lack of
successful privatization of the country’s electricity generation plants (the
auction was postponed for the third time on 9 May due to social unrest),
which is expected to generate US$ 800 million in revenues, would further
undermine fiscal discipline and is sure to require a renegotiation of
fiscal deficit targets with the IMF for this year. Consensus Forecast
panelists expect the government to overshoot the upper ceiling.
Inflations turns positive in April for the first time in months
In April, consumer price increased 0.73% over the previous month. The
increase represents the second consecutive monthly spike in consumer
prices following various months of declining consumer prices. Higher
prices for food and transport and communications drove the March price
hike. Housing, fuels and electricity as well as furniture prices also
registered strong increases. As a result of the April price spike, the
annual headline inflation rate turned positive for the first time in four
months, thus taking Peru officially out of the deflation valley. The
increase is barley notable on an annual level – 0.05% in April – but
follows on a 1.1% deflation rate registered in February and March this
year. Panellists have further lowered their year-end inflation forecasts
by 0.2 percentage points since last month.
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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