Peru's biggest bank cautiously optimistic on 2024 economy

Peru’s biggest bank, BCP, part of Credicorp, expects economic growth of 2% next year but sees the potential to reach 3%, which would be enough to begin reversing the crisis.

The initial rebound will be based on a favorable copper price, estimated at US$3.85/lb, the recovery of aqua- and agriculture, slowing inflation and continuity of infrastructure megaprojects, according to a report.

(See the full report in the Documents box in the top-right corner of the screen.)

Although the El Niño climate phenomenon remains the main threat to the economy, with climatological impacts forecast to last through April 2024, “sea temperature has been decreasing, which points to a potential decrease in the probability of an event of moderate/strong magnitude and an increase in that of a weak one,” the report said.

A weaker El Niño is the key factor to achieve higher-than-anticipated growth, although more than 3% will depend on factors such as the material impact of the event. While the volume of rains is important, the progress of preventive works to alleviate disasters also plays a role.

The execution of the preventive works budget reached 30% in mid-November, daily Gestión quoted comptroller general Nelson Shack as saying.

On the other hand, if the copper price rises to US$4.00/lb, the mining sector could get a boost and maintain investments while reducing inventories, enabling it to make similarly productive contributions as it did in 2023. The BCP report said US banks such as JPMorgan, Goldman Sachs and Bank of America expect a price above US$4.00/lb.

Finally, with no sharp political and economic turnarounds on the horizon, growth could exceed expectations.

"A scenario of zero or negative growth in 2024 is a tailwind and less likely than a positive surprise of a rebound of 3% or more," the report said.