The economic future of Peru: projections and challenges following the presentation of the Inflation Report

This Friday, June 21st, the Central Reserve Bank of Peru (BCR) will present its Inflation Report, a crucial report that covers the new macroeconomic trends in the country, including inflation, monetary policy, and economic projections. Leading up to this event, various financial institutions have adjusted their economic forecasts, with notable mentions including Banco de Crédito del Perú (BCP), the Peruvian Institute of Economics (IPE), and BBVA. During the presentation of BCP's Quarterly Economic Studies Report, the Manager of the Economic Studies Area, Carlos Prieto, expressed concern regarding the possibility of credit rating agencies downgrading Peru's credit rating to the minimum investment grade. Prieto pointed out that factors such as Congressional spending initiatives, fiscal benefits, the situation of Petro-Peru, and pension reform could lead to this situation, negatively impacting interest rates and financing for both the government and Peruvian companies. However, despite this negative scenario, BCP maintains its economic growth projection at 3% for 2024. A reduction in the fiscal deficit is expected by the end of the year, driven by the recovery of non-primary sectors and stability in copper and gold export prices. On the other hand, IPE raised its economic growth projection from 1.9% to 2.4% for 2024, attributing this growth to domestic demand and the recovery of sectors such as construction, commerce, and services. Private investment has shown significant progress in the first months of the year, breaking the trend of decline in recent quarters. BBVA also raised its growth estimate for 2024 from 2.7% to 2.9%, mainly due to the expected positive impact of pension fund withdrawals. Sectors such as agriculture and fishing have contributed to economic growth, with notable progress in public investment. Despite favorable short-term forecasts, analysts warn that expectations for 2025 could be more moderate, as a reduction in the impact of pension fund withdrawals is expected. Long-term projections remain stable, with an average growth of 2.7% until 2029. In summary, the economic projections from various institutions coincide in a scenario of growth for the current year, driven by specific sectors and countercyclical measures. Although there are discrepancies regarding the underlying causes of this growth and future prospects, economic activity is expected to remain dynamic in the second quarter, with factors such as agricultural growth and public investment as main drivers. The evolution of key variables in the coming quarters will determine the need for adjustments in these projections.