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Peru meets IMF public sector
deficit targets in 2002
In the fourth quarter, the non-financial public sector deficit reached
3.5% of GDP. The fourth quarter deficit thus stayed a full 2.0 percentage
points below the deficit for same period in 2001. Typically, Peru incurs
the lion share of the annual deficit in the final quarter of the year.
Particularly noteworthy was that last year’s final quarter deficit
represented the lowest fourth quarter deficit in more than a decade. The
decline in the deficit was attributed to lower non-financial central
government expenditure and higher current revenues. Lower capital
expenditures and tax measures applied in the second half of the year
allowed tax collection to recover and helped contain spending. For the
full year 2002, the public sector deficit reached 2.3% of GDP, down 0.2
percentage points from 2001. As a result, the financing requirement
decreased 3.0% in 2002 to 4.7 billion soles (US$ 1.3 billion), of which
US$ 1.2 billion correspond to external resources, US$ 420 million to
privatization proceeds and US$ 285 million to deposits accumulation.
Current account deficit remains stable despite pickup in domestic demand
In the fourth quarter, the current account balance incurred a deficit of
US$ 316 million. This was both above the deficit incurred in the third
quarter of 2002 (US$ 203 million) and the deficit of the fourth quarter of
2001 (US$ 199 million). The increase in the deficit over the prior year
period was mainly due to a higher deficit in investment incomes, amid
higher net outflows from both the private and the public sector. The
financial balance recorded a deficit in the final quarter last year (US$
92 million) versus a surplus of US$ 156 million in the same period in
2001. Consequently international reserves dropped US$ 296 million in the
fourth quarter, according to balance of payments data. The fourth quarter
outflow was not representative of the full year. In 2002, the current
account balance reached US$ 1.2 billion (2.0% of GDP), which was offset by
a US$ 1.9 billion surplus in the capital and financial account balance.
The 2002 trade surplus (US$ 261 million) was offset by the deficits in
service and income accounts and lower current transfers. The trade surplus
resulted from greater export dynamism (gold and copper), which exceeded
the growth in imports. The income account deficit was the consequence of
lower public sector income and higher transfers to abroad. Consequently,
international reserves added US$ 832 million in 2002. For 2003, Consensus
Forecast panellists expect the current account deficit to remain virtually
unchanged from last year’s level at US$ 1.2 billion, or 2.0% of GDP.
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