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Peru approves US$300mn economic boost

Bnamericas Published: Friday, October 18, 2019
Peru approves US$300mn economic boost

Martín Vizcarra's government has approved extraordinary measures to boost public spending of over 1bn soles (US$300mn) in Peru's housing, agriculture, health and education sectors.

Economy minister María Antonieta Alva said these measures will immediately favor labor intensive sectors such as construction and services. The spending would thus result in higher income and consumption of families.

"These measures to boost public spending are essential to expand infrastructure for the benefit of citizens, ensuring the use of budget resources, which will inject dynamism into economic activity and preserve compliance with fiscal rules," the minister said in a statement.

The extraordinary measures - promulgated Thursday in an emergency decree - will contribute 0.5% to quarterly GDP, Alva added.

MEASURES

The emergency decree includes five extraordinary measures, such as the transfer of resources from the national government and the regional governments to the contingency fund to finance the maintenance of schools and hospitals.

It also authorizes regional governments to redirect resources to projects that are in the execution stage, and whose total updated amount of investment is over 200mn soles.

TAX SOLIDITY

The Peruvian economy is slowing down mainly because of a political crisis that led Vizcarra to dissolve congress, call parliamentary elections for January and form a new cabinet.

According to various analysts, lower business confidence affects growth expectations, but the fundamentals of the Peruvian economy remain strong.

“This year there is particularly a challenge in executions in Peru, after last year's regional elections, but we are committed to a good fiscal result. That is not a concern and, incidentally, the level of debt is a bit low, on the order of 15% of GDP and that helps the rating,” Lisa Schineller, Standard & Poor's director for Latin America told BNamericas.

S&P rates Peru 'BBB +' with a stable outlook and, despite political noise, the country has the backing of strong economic institutions such as the central bank, Schineller said.

Pictured: School in Sacsayhuamán, Cusco region

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