Peruvian business confidence improves after Castillo's removal

Peruvian businesspeople have become more optimistic since the removal of president Pedro Castillo in December.

Despite widespread public protests after Castillo was ousted when he tried to dissolve the legislature and establish a national emergency government, which are estimated to have caused losses of around 1 percentage point of December GDP, business expectations have improved, according to the latest survey by the central bank (BCRP).

The monthly survey of Peruvian companies, financial institutions and economic analysts, carried out in the second half of last month, indicates that 42.4% of those consulted expect economic growth over the next three months, up from 37.9% in the December survey. For the next 12 months, the study showed that 54.0% of those polled forecast growth, an increase from 43.3%.

NORTH MORE OPTIMISTIC

However, in geographic terms, the figures were significantly better in northern Peru, where all of the indicators improved from the November survey, while in central Peru, the outlook was more mixed, although the survey respondents still expect economic growth at both three and 12 months. 

In the south, where social unrest has been greatest after Castillo was ousted, more of those surveyed think the economy will shrink over the next three months, but at 12 months there is greater optimism, with over 54% now expecting growth.

SECTORS

All of Peru's major economic sectors – mining, hydrocarbons, manufacturing, construction, commerce and services – expect substantial economic improvements in the next three and 12 months, according to the figures.

Although mining remains on uncertain ground due to social conflict, the survey respondents did show significantly higher optimism for the months ahead. Positive three-month expectations for the sector increased from 33% in November to 50% in December, while 55% now expect demand to rise in the first quarter, up 10 percentage points, and 43% think investment will increase in the period, another jump of 10 percentage points, according to the BCRP report.

Meanwhile, in the construction sector, there was no change in optimism over the next three months and more businesspeople expect demand to subside. This is partly due to the change in regional authorities after the 2022 regional and municipal elections, where the new administrations generally result in slower progress in pending projects. 

However, positive expectations for the next 12 months surged from 35% of those surveyed in November to 58% last month and 59% expect demand to rise, up from 30% in the previous report, with 50% also forecasting growth in employment, up from 35%.