Peru - Economic Briefing April 2004

Economy Set for Robust Growth

Driven by rebounding global demand and favourable commodity prices, the Peruvian economy is in for yet another year of robust growth.  In addition, the country will begin to profit from the stimulating effect of the giant Camisea gas project that will bolster economic growth in the second half of this year.  Barring further negative surprises on the political front, the economy should remain on track in the next two years.

Economy develops above expectations in January
In January, the economy expanded by 3.0% compared to the same month in 2002.  The reading was just a notch below the pace observed in December of last year, when the economy had grown by 3.1%, but was slightly above market expectations, which had anticipated a more moderate start into the year.  However, if seasonal factors are taken into account, the economy actually stepped up the pace from December to January.  According to seasonally adjusted figures the economy expanded 1.9% over the preceding month and thus even exceeded the very robust 1.1% growth observed in December. 

Fishing reverts December contraction amid higher anchovy catch
The similar growth rates observed in December and January conceal fundamentally different developments in the various sectors of the Peruvian economy.  The strongest shift occurred in the fishing sector where activity reverted from a 43.6% contraction in December to a 12.0% expansion in January.  Even though the 55.6 percentage point shift in the development of the fishing sector appears very large, the sector frequently experiences these types of erratic shifts, following sudden climatic changes and government-induced fishing bans.  In mid-January, the government imposed a ban on the catch of anchovies, the most important species, which accounts for almost half of total fishing output.  However, as the anchovy fishing ban last year lasted almost the entire month, the anchovy catch this year more than quintupled compared to January 2003.  Primary manufacturing, which depends to a large extent on fishing as its key input, also profited from the recovery of the fishing industry.  In January, manufacturing based on raw materials increased 5.7% over January 2003, contrasting a 16.0% contraction the previous month. 

Non-primary manufacturing slows slightly amid lower intermediate goods output
Growth of non-primary manufacturing, on the other hand, slowed when compared to December.  The 2.2% annual growth observed in January was 0.2 percentage points below the rate registered in December.  Lower intermediate goods production (January: -2.1% yoy; December: +2.7% yoy) prompted the slowdown in non-primary manufacturing.  Consumer goods production, on the other hand, accelerated notably (January: +5.7% yoy; December: +2.9% yoy) and capital goods experienced a significantly less pronounced contraction in output (January: -7.9% yoy; December: -39.0% yoy).  In sum, the rebound of primary manufacturing more than compensated for the slowdown in non-primary manufacturing and, as a result, total manufacturing activity grew by 2.8% over January 2003 compared to a 1.9% contraction in December.

Mining accelerates amid higher gold output
Mining also experienced a notable improvement over December.  In January, the sector advanced 11.4% over the same month last year compared to a much more moderate 2.6% expansion observed in December.  The improvement was due to a massive boost to gold output, which advanced at the quickest pace registered in the past two years.  Gold production increased 25.2% over January 2003 (following on 1.1% growth in December), as the country’s largest gold mine Minera Yanacocha, which accounts for more than half of the total gold output, extracted more than one third more gold than in the same month last year.  Copper, which is slightly more important than gold in terms of weight within the mining sector, also improved over December as output increased by 4.9% in January compared to a 1.3% contraction in the previous month.