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In the past year, growth was mainly propelled
by the Antamina copper-zinc mine. This extra boost to GDP growth provided by
the mining sector has now abated. Nevertheless, the economy continues to
grow at favourable rates, which has prompted upgrades to this year’s growth
forecast. However, increased pessimism for global growth prospects weigh
heavily on the outlook for next year. |
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Economic activity healthy despite
missing mining boost
The economy continues to develop favourably. In August, the indicator for
gross domestic product (GDP) advanced 3.8% compared to the same month last
year, the same growth rate as reported for July. The growth rate is
noteworthy, given that August constitutes the second month, in which the
favourable statistical comparison effect in mining, which had boosted
economic growth over the past year, is not adding to the overall economic
performance. That said, mining actually lifted growth in August to the
same level as the preceding month. In August, the sector, which accounts
for close to 5% of total economic activity expanded by 6.5% over the same
month last year. In July, mining added only 1.8% over July 2001, the first
single-digit reading since the same month last year. Stronger mining in
August compensated for lower growth rates in virtually all other sectors:
Agriculture and livestock dropped 0.5% over August 2001 compared to 1.2%
growth in July; manufacturing grew by an annual 4.1% rate after 5.4% in
July; construction added 7.8% (July: +13.5%); commerce grew 1.0% (July:
+1.3%) and so-called “other services”, which account for the lion share of
GDP in INEI’s national accounting system, increased 3.3% after 4.0% growth
in July. The only sector apart from mining that experienced an improvement
over July was fishing. The sector remained virtually unchanged compared to
the same month last year (+0.1%) but this in fact constitutes an
improvement over the small decline ( -0.7%) reported for July).
Given the healthy growth reported for the first two months of the third
quarter and the absence of a serious threat to the Peruvian economy,
panellists have lifted their 2002 GDP growth outlook a notch since last
month but are still below the 3.7% government forecast, which was
confirmed by the economy minister Javier Silva Ruete as recent as 3
October. However, the reduced prospects for a global recovery in 2003 have
taken a toll on the projections for next year. Compared to last month, the
Consensus diminished its growth forecast by 0.3 percentage points.
Inflation
bounces back in September
In September, the Consumer Price Index for Metropolitan Lima increased
0.47%. Higher prices in the category of housing rents, fuels and
electricity, as well as food and beverages drove the September increase.
Transport and communications prices dropped and thus mitigated the overall
price increase. As a result of the September price rise, annual headline
inflation rose to 0.67% from 0.26% in August. While still very moderate,
the September rate represents the highest annual headline inflation value
observed since October last year and steers Peru clear of deflationary
territory.
Since the end of last year, the countries inflation rate has hovered
around zero, well below the lower end of the Central Bank’s year-end
inflation target range of 2.5% +/- 1%. Nevertheless, the current core
inflation rate of 1.5% in September and rising oil prices suggest that the
Bank may still achieve its target. If consumer prices expand by a monthly
0.3% rate in the final three months of the year, annual headline inflation
would rise quickly, ending this year at 2.1%. Consensus Forecast
panellists continue to see the potential for rising consumer prices as a
real possibility and see the inflation rate rising by the end of the
current year. In 2003, more robust domestic demand should exert some
pressure on prices with the year-end inflation rate rising to further%.
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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