Peru Q4 economic growth accelerates despite mining slump

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Friday, February 22, 2019

Peru's quarterly economic growth accelerated, as gains in hydrocarbons, manufacturing, fishing, electricity, construction and telecommunications offset a drop in production of most metals.

GDP grew 4.8% in the fourth quarter compared with 2.4% and 5.5% in Q3 and Q2, respectively, Peru's national statistics snstitute said in a report.

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Manufacturing grew 11.4% as production of metallic products jumped 18.7%, while non-metallic mining output expanded 5.4% and basic metallic industries shrank by 0.9%, the agency said.

Mining output dropped for the third straight quarter, contracting by 2.8% in the quarter from 4Q17, as zinc fell 10.4%, followed by gold (-7.8%), silver (-9.2%) lead (4%) and iron ore (-5.1%), the agency said. Tin production rose 17%, while copper climbed 0.4%, according to the agency.

Exports increased 2.2% in the quarter as refined copper sales rose 2.2% and lead grew 9.9%, while zinc sales fell 29.9% and gold dropped 6.8%. Imports were up 0.9%.

Consumer demand was 3.8% higher in the quarter, while public spending was up 3.3%, the agency said. Construction activity rose 7.9% as central, regional and municipal governments invested more in infrastructure.

President Martín Vizcarra, who replaced Pedro Pablo Kuczynski in March 2018, is struggling to accelerate tens of billions of dollars in infrastructure investment projects, including line 2 of the Lima metro, preparations for the Pan American Games and a 26bn (US$8bn) flooding reconstruction program.

Peru is likely to record 4% growth in the first quarter of 2019, although newly-appointed local government officials will take time to invest in infrastructure projects, according to Scotiabank.

"The sustained expansion of consumption and the gradual acceleration in private investment should continue to have a positive impact on services, commerce and manufacturing," Scotiabank Perú chief economist Pablo Nano wrote in a report. "Construction will grow, although at a slower pace than in Q4."

Peru is the world's second largest copper, zinc and silver producer, third ranked in tin and No. 5 in gold.