Peru's economy ministry trims GDP growth forecast, but bullish on mining

Bnamericas Published: Friday, August 26, 2022

Peru's economy and finance ministry (MEF) has cut its GDP growth forecast for 2022 to 3.3% from the 3.6% in April. 

The reduction in the expected growth is due to "temporary supply shocks, unfavorable external conditions due to the global slowdown, adjustments in commodity prices and inflationary pressures," it said in the multi-annual macroeconomic framework report for 2023-26 (MMM), a document outlining updated economic information and fiscal policy guidelines to follow in the coming years. 

The MEF's growth forecast for primary GDP – which accounts for 25% of total GDP – was reduced to 2.2% from the previous 4.9% after contracting 0.5% in January-June. 

Although private spending is one of the few categories where growth for the year was revised upwards due to higher private consumption – to 3.7% from 3.3% – private investment is expected to remain flat in 2022.

Despite the stark reduction in the MEF's predicted GDP growth for this year, it is still well above the market consensus of 2.6% for 2022, according to FocusEconomics. 

Credicorp, meanwhile, this week lifted its GDP growth projection slightly to 2.8% from 2.5% for the year, but there are few entities and consultancies who still believe that Peru will grow more than 3%. The MEF minister himself, Kurt Burneo, recently stated that production would grow only 2.2% in 2022.


Even though the MEF is expecting lower growth this year, it still expects the primary sector to reverse its decline and grow 4.9% in the second half of 2022.

Part of that growth will come from the dissipation of supply shocks, "which will allow greater copper production from Las Bambas, Mina Justa and Toromocho; in addition to the start of operations at Quellaveco," the MMM report reads states. 

Las Bambas finally resumed operations in mid-June after a stoppage of nearly 60 days due to protests, while Quellaveco delivered its first copper production this week.

On the other hand, the MMM also anticipated that electricity generation grew 4.8% in July, the highest expansion seen since September 2021.

Although the ministry's outlook for 2H22 is positive, it is assumed that the supply shocks will gradually fade. Part of these problems are due to social conflicts, with the agreements reached being particular cases rather than responding to a national policy of dialogue with protesters, which means that the difficulties could resurface. There is also no clear strategy to recover business confidence, beyond responding to market dynamics.


The projection for GDP growth in 2023 remains at 3.5%, but the forecast for the increase in primary GDP has been cut to 5.7% from 6.1%, while the expansion in non-primary GDP has been hiked to 3.1% from 3.0%.

Meanwhile, the mining sector is expected to rebound 7.2% in 2023, with growth for the manufacturing and construction sectors at 3.6% and 2.3%, respectively, according to the MMM.

Finally, it is estimated that investment in infrastructure will exceed US$3.0bn in 2023, due to works on projects awarded between 2020 and 2021. If so, it would be highest annual investment in the sector for six years.

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