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Economy
develops above expectations in March
In March, the economy expanded by 5.5% compared to the same month in 2003.
The reading was well above market expectations, which had anticipated that
growth would come in at 3.3% in the final month of the first quarter.
Instead, the March reading was well above the already strong 4.8% growth
registered in February. The current growth pattern observed in the
year-on-year comparison is also reflected in data adjusted for seasonal
factors, which show that the economy expanded 2.0% over the preceding
month compared to a small 0.1% decline in February.
First
quarter puts an end to last year’s deceleration
Owing to the above-expectations March performance, data for gross domestic
product (GDP) for the first quarter also came in a notch above projections.
In the first quarter, the economy expanded by 4.6% over the same period
last year, which represented a pickup compared to the 2.9% growth recorded
in the fourth quarter and ended the continuous deceleration in activity
observed throughout last year.
Buoyant
exports drive growth
A combination of external and domestic factors buttressed first quarter
growth and drove the acceleration compared to the fourth quarter.
The positive contribution from the external sector increased further, as
export growth accelerated from 5.7% in the fourth quarter to 11.9% in the
first, due to higher export volume of mining products such as copper
(+13.9% year-on-year), gold (+16.0% yoy), lead (33.5% yoy) and silver
(+2.4% yoy). In addition, non-traditional exports also exhibited a
positive development with an overall increase of 30.8%. Imports, on
the other hand, grew by just 1.9%, only one tenth of a percentage point
quicker than in the fourth quarter, which contributed to the sharp
increase in the net contribution of the external sector.
Investment
accelerates despite delays in public sector projects
Investment also contributed to the acceleration observed at the beginning
of the year. In the first quarter, gross fixed investment added 5.1%
over the same period last year, following on 4.4% growth in the fourth.
The acceleration was concentrated in the private sector, which more than
doubled the anaemic 2.7% growth in the final quarter last year to 8.0%
annual growth in the first quarter. Private investment benefited
from progress in important projects such as Camisea and those carried out
by other mining enterprises. Public investment, in contrast,
reverted the positive development observed towards the end of last year
(+11.7% yoy) and actually contracted 12.9% in the first quarter 2004.
However, according to the Central Bank, the sharp reversion in public
sector investment is purely due to the delay in transfers from the central
to local government and should thus be compensated for in the future.
Growth
in consumption slows, as public sector slumps
Total consumption also increased. However, the 2.8% growth fell
short of the 3.1% expansion recorded in the fourth quarter. Once
again the public sector is the main reason for the slowdown. Private
consumption actually expanded at a quicker pace (+3.1% yoy) than in the
fourth quarter (+2.6% yoy). The expansion was reflected in a 22%
expansion of consumer credits, a 10% increase in car leasing and the
growth mall and supermarket sales (+28.7% yoy and +12.8% yoy, respectively),
coupled with the increase in urban employment in enterprises with 10 or
more workers (+1.9% yoy). Public consumption, in contrast, slowed
from 6.3% growth in the fourth quarter to only 0.3% in the first quarter.
Mining
propels growth amid higher output of copper and gold
In the first quarter, all sectors expanded. Only one sector, the
so-called other services, which accounts for all non-commercial services,
expanded at a slower speed than in the fourth quarter. Mining led
all other sectors in terms of growth and thus continued to be the main
driver of the Peruvian economy. Mining and fuels accelerated notably
from the 4.2% expansion in the fourth quarter, adding 12.4% over the first
quarter 2003. Metals mining (+14.0% yoy) profited from a substantial
expansion in copper and gold output. Copper, which is Peru’s most
important mining commodity, added 24.6% over the same quarter last year.
According to the National Statistical Institute (INEI), the increase
was mainly due to a recovery of full capacity output at the Antamina mine,
following on a period of declining output. Gold, which is only
slightly less important than copper in terms of its relative weight within
the mining sector, expanded 23.1% over the first quarter 2003. The
massive boost to gold production was attributable to a stepping up of
production at the country’s largest gold mine Minera Yanacocha that
accounts for more than half of total gold output.
Manufacturing
exits slump
Construction constituted the second-fastest growing sector, as growth
accelerated from 4.1% to 7.1% in the wake of new housing programs
implemented by the Toledo administration. Fishing confirmed the
erratic pattern exhibited in the past and turned a 11.4% contraction
recorded in the fourth quarter 2003 into a 6.5% expansion in the first
quarter. As a result, primary manufacturing, which depends to a
large extent on fishing as an input, edged out a modest 0.5% expansion
over the first quarter last year, following on a 5.2% contraction in the
fourth quarter. Non-primary manufacturing also accelerated (+6.0%
yoy; Q4: +1.2%) and thus the entire manufacturing sector expanded a very
solid 5.0% after a slight 0.2% contraction in the final quarter last year.
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