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So far this year, the economy has been
expanding at a robust pace. However, growth was mainly propelled by the
Antamina copper-zinc mine in southern Peru. As of now, the beneficial
statistical effect will wane, which threatens to throw the economy back into
a more modest growth path, since the rebound of private sector investment
promised by Toledo is failing to materialise. |
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Quickening pace of domestic
demand in second quarter
The Central Bank confirmed the preliminary annual 5.3% gross domestic
product (GDP) second quarter growth rate reported by the National
Statistical Agency and provided additional information about the
development of major macro-economic aggregates. According to the Central
Bank, domestic demand increased 4.0% in the second quarter compared to the
same period last year, a much faster clip than reported for the first
quarter, when the aggregate added 1.2%. Seasonally adjusted GDP and
domestic demand recorded increases of 2.2% and 1.7% respectively compared
with the first quarter.
Consumption and investment improve but investment remains in dire state
The improvement over first quarter growth was driven by both consumption
and investment. Consumption increased 4.2% (up from +2.8% year-on-year in
the first quarter) amid higher private and government sector consumption.
Gross fixed investment remained in negative territory, declining 1.9% over
the second quarter 2001. While this year’s second quarter figure
represents an improvement when compared to the 5.7% contraction registered
in the first quarter, it nevertheless comes as a disappointment, as
markets had expected investment to contract at a lesser rate. Investment
is in a dire state, as the Toledo administration’s plans to revive private
sector investments have so far failed to materialize. Gross fixed
investment has now contracted for the eighth consecutive quarter after
only three quarters of positive growth following the 1999 recession. In
absolute terms, the investment level measured in the second quarter was
last observed in 1994 and is not even two thirds of its peak level in
1997. The net contribution of the country’s external sector was positive%
in the second quarter. According to the national accounts data, exports
increased at an annual rate of 11.7 whereas imports increased at much more
moderate 3.5% clip.
Mining
leads growth due to Antamina mine
On a sectoral basis, growth was led by the mining sector, which mushroomed
18.3% compared to the second quarter 2001. As we have repeatedly reported
in previous editions, the strong increase in mining activity is due to the
Antamina copper-zinc mine in southern Peru, which was not operative in the
same period last year. However, the favourable statistical comparison base
is about to wane in the third quarter, as production at the mining project
was ramped to full operational levels in the third quarter. Construction
was the second-best performing sector, adding 7.4% on an annual basis.
However the reading represents a slowdown when compared to 10.3% growth
registered in the first quarter.
Fishing
slowest growing sector but still positive
Agriculture also expanded at an above-average pace, up 5.6% in the second
quarter following on 7.4% growth in Q1. The most important contribution to
the quicker pace of economic growth came from the manufacturing sector,
which expanded by 4.3% in the second quarter after a 0.8% contraction in
the first quarter. Wholesale and retail sale activities also rebounded
from a 0.1% decline in Q1 to 4.0% growth in the second quarter. Finally,
the fishing sector carried the red lantern, with a meagre 2.2% growth
rate. However, the reading represents an improvement from double-digit
contraction in the first quarter.
Economy
develops favourably in July but Antamina mine effect is now a thing of the
past
In July, the economy advanced 3.8% compared to July 2001, slightly ahead
of the 3.6% registered in June and above market expectations of 2.7%. Most
importantly, from now on, the Antamina mine effect will not boost overall
economic growth figures as observed in prior months. In July, mining added
only 1.8% over July 2001, the first single-digit reading since the same
month last year. Although mining accounts for less than 5% of total GDP
the effect will be felt strongly in overall GDP figures, as the growth
rates in mining, which often exceeded 20% in recent months, contributed
more than 40% of total growth on average in the past four quarters. On a
positive note, in July, construction surged 13.5% and thus constituted the
strongest growing sector in the economy. Fishing reverted into negative
territory, declining 0.7% over July 2001, after only a brief two-month
episode of positive growth. Given the strong growth in the first half and
the absence of a serious threat to the Peruvian economy, panellists have
lifted their 2002 GDP growth outlook a notch since last month. The GDP
growth projection for 2003 was lowered a notch.
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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