Peruvian economy will get back on track and grow 4.4% in 2018 —above its 3.5% potential— driven by better commodity prices and investment in post-disaster reconstruction, J.P. Morgan projected on Wednesday.
During a presentation on Peru's economic outlook at Baker McKenzie headquarters in London
, J.P. Morgan Emerging Markets Research Global Director Luis Oganes affirmed "the worst of the economic downturn is over" and the financial firm "expects a recovery."
"We estimate growth for this year at 2.6% due to the weak first half of the year. However, [we anticipate] much better figures for the second half of 2017, and we forecast 4.4% growth for next year," Oganes expressed.
"We are more optimistic," the officer added.
J.P. Morgan's estimates are thus in line with those of the Central Reserve Bank of Peru (BCR), which projects growth at 2.8% for 2017 and at 4.4% for 2018.
Reconstruction with Changes
As is known, the Kuczynski administration plans to invest more than S/26.6 billion (over US$8 billion) by 2021 in its Reconstruction with Changes
"Reconstruction efforts will become evident in terms of producing aggregate demand," he pointed out.
In addition, the J.P. Morgan representative anticipated further capital inflow
, which would help maintain a stable exchange rate and "relatively low" interest rates.
While Peru's economic growth would be driven by a greater fiscal stimulus in 2018, Oganes explained the country would require greater private participation to maintain sustained growth as of 2019, since the private sphere makes up 80% of total investment.
Finally, Oganes ruled out inflation risks as a result of the country's 4.4% GDP growth projected for next year, which exceeds its 3.5% potential.
In this respect, he recommended that Peru seek to increase its current GDP potential based on structural reforms focused on labor policy, education, FTAs and the debureaucratization of private investment.