Peru Economic Outlook. December 2022

The economy will grow 2.7% in 2022, an upward revision. In 2023 the expansion will be 2.5% given lower global growth, high interest rates and lower public investment. On the other hand, Quellaveco will reach its operational capacity and tourism will normalize. This will reverse in 2024 and activity will grow 2.4%.

Key points

• Key points:
• High inflation, interest rate increases, the impact of the war in Ukraine, and COVID in China have induced a slowdown in global economic activity throughout the year despite resilient labor markets. We forecast global GDP growth of 3.3% in 2022 and 2.3% in 2023.
• On the fiscal side, we forecast a deficit around 2% of GDP for 2023 and 2024, consistent with gross public debt remaining in those two years between 34% and 35% of GDP, but with a slight upward trend later on.
• The PEN will show some weakness in 2023, in an environment of greater perception of global risk and a decrease in the interest rate differential between soles and dollars, which will reduce the appetite for assets from emerging economies. We project that, after concluding 2022 between 3.85 and 3.95 soles per USD, the exchange rate will end between 4.00 and 4.10 soles per USD in 2023.
• We anticipate that inflation will end the year around 8.0% and the next around 3.5%. In the short term, inflation will show downward resistance. However, from March 2023 its decline will be more noticeable, thanks to a favorable YoY basis for comparison and a downward trend in the international prices for food supplies and oil.
• In a context of still high inflation, as well as inflationary expectations that continue to be above the target range, we do not rule out that the Central Bank will raise its reference interest rate a little more, despite the slowdown in activity. Later, in mid-2023, when inflation is in a sharp decline and the Fed has paused, the Central Bank will find space to start normalizing monetary policy, taking it towards a more neutral position.

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