Peruvian economy may have expanded 1.5% in the first quarter of the year despite "Coastal El Niño" weather phenomenon impacts in northern regions, Economy and Finance Minister Alfredo Thorne projected on Tuesday.
"Growth may stand at 1.5% [in the first quarter]; that is probably the result we may see in March," the government official estimated.
"We expect the economy to expand around 4% by the third and fourth quarters, thus leading to the 3% growth [rate] we have forecast for 2017," he added.
To this end, the government has prepared a strategy underpinned by three cornerstones: a expansionary fiscal policy, a boost to production in key sectors, as well as the promotion of investments.
Strong fiscal stimulus
In this sense, the Finance head referred to the "strong fiscal stimulus" launched by the government. Said impulse is valued at S/9.4 billion (about US$2.8 billion), "which accounts for 1.3% of GDP."
"And we are also taking a set of administrative measures geared towards budget flexibility to reallocate [budget] items," he added.
According to Thorne, said measures should be enough to boost economic growth, especially in 2018.
"This should provide a stimulus to 'hook' private investment —mainly in infrastructure— by unblocking projects halted by the Odebrecht [graft] case," he observed.
Still, the economist reiterated recent "Coastal El Niño" disasters and the Odebrecht corruption scandal will take a toll on the economy, costing 1.5 percentage points of GDP in 2017.
"However, we've had a more favorable international environment and we see that, overall, the global economy has bounced back." he expressed.
Sources of growth
Thorne also indicated Peru does not have enough long-term sustainable growth sources, as mining alone cannot push the economy forward.
"Starting in 2018 and 2019, the economy will be driven by the increase in infrastructure, [economic] formalization, as well as greater investment in non-tradable sectors related to construction and others […]," he noted.
Lastly, Thorne warned about the temptation to drop long-term reforms when facing shocks such as "Coastal El Niño" and the Odebrecht case.
"However, these reforms will not be dropped, but rather deepened, since [recent events] have brought into the open our serious infrastructure weaknesses."
(END) CNA/DHT/MVB