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Peru increases public spending as economic outlook dims

Bnamericas Published: Friday, June 21, 2019

To deal with a stagnant economy, Peru’s government pledged to allocate more funding to regional infrastructure projects.

President Martín Vizcarra approved 195mn soles (US$60mn) in additional public funds for 111 projects managed by local and regional governments in 13 regions, largely in the health and education sectors. Ucayali, San Martín, Huánuco and Arequipa regions were assigned the bulk of funding.

Projects include health facilities in Pucallpa, Picota, Tocache and Tingo María in the northern jungle and Cotahuasi and Camaná to the south, part of a package of 48 hospitals and health centers to be completed next year, according to the government.

The government is also pushing congress to pass legislation guaranteeing stocks of generic brand medicines, President Vizcarra said.

“At the start of this government, we set out our policy in a roadmap where we stated we want to maintain economic growth that translates into social development,” Vizcarra said.

He later traveled to Huancavelica region in the central highlands to mark the start of construction of the 30m Santa Rosa bridge in the regional capital, where the Zacarías Correa regional hospital is also planned. Vizcarra also inaugurated a health center in Paucarbamba, benefitting 17,800 inhabitants in Churcampa province.

Huancavelica, one of Peru’s poorest regions, saw extensive damage during a 2007 earthquake and the 2017 El Niño phenomenon.

However, the financial markets were rattled by the recent announcements of near-zero growth in April and a decline in public infrastructure spending through May. Banco de Crédito del Perú (BCP), Peru’s largest bank, cut its 2019 GDP forecast to 3% from 3.7%, citing an unfavorable international scenario and slumping local investor confidence.

The bank also pointed out the government will struggle to curb its fiscal deficit after the finance ministry sold US$2.5bn in sol and dollar-denominated bonds last week.

“First-half growth has been disappointing,” the bank said in a report. “Peru faces the risk of a decade of frustrating low growth.”

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