Peru begins to show signs of economic recovery

Peru is beginning to show clear signs of an economic recovery. 

After a contraction of 0.55% in 2023, this year has started with an improvement in key indicators such as private investment and cement consumption – a figure that reflects private sector construction.

Economics think tank IPE estimated that private investment grew 8.4% in January compared to the same month last year, and, according to the association of cement producers (Asocem), cement consumption rose 9%.

According to IPE, the increase in private investment bodes well for an end to six quarters of consecutive falls in Q1 – while the cement data follows 16 months of declines.

Canada’s Scotiabank said January's figures mark a turning point in the context of the current recession, although the outlook for the following months is uncertain.

“In January, growth should be lower than the average for 1Q24, as the negative impact of the fishing sector was still felt … in February the highest expansion rate will be recorded because this effect will not be felt and, as it is a leap year, there will be one more day of production. In March there will be less growth due to the Easter holidays that in 2023 occurred in April,” the bank said in a report. 

Scotiabank estimates that GDP will grow 1.5% in 1Q24 and 2.7% for the entire year.

IMPROVEMENTS  

Researchers at Banco de Crédito  BCP), the largest bank in Peru, also forecast an economic recovery. According to BCP, electricity demand has grown 5.2% in February compared to the same month 2023 and up from 3.9% in January. The bank said that as local and regional governments have begun their second year in office, public investment rebounded 128% in January after growing 13.6% in December.

Although the threat of a strong El Niño weather phenomenon is not as big as was expected in mid-2023, it is still a factor that could impact growth. For now, the absence of protests, and a more stable social climate, are positive signs.

That should also benefit the mining sector. Although Scotiabank believes the energy and mines ministry’s US$5.4bn projection for mining investments in 2024 is optimistic, the bank still expects the amount to be US$5bn.

“The sector will benefit not only from the low base of the previous year, but also from the fact that this year the construction of mostly brownfield projects will begin .... The prices of metals such as gold and copper that we project for this year and 2025 are at levels that would normally promote mining investment,” the report says.