Vice President - Senior Analyst Jaime Reusche predicts that public investment in Peru will help construction sector –which has weakened in the past few months– pick up in the country, especially starting the second half of the year.
The Minister of Economy and Finance (MEF) Alonso Segura has recently informed that public investment will increase by 15.3% –according to the 2016 Public Budget– and become one of the major growth factors in 2016.
“It is expected to help construction sector to rally in the short-term, a sector that has been contracting for several months,” Reusche told Andina news agency.
Reduced Infrastructure Gap
Observation shows that the objective of Peru is to narrow the huge infrastructure gap in the country.
“We also understand the objective is to reduce the huge infrastructure gap in the country, which is why expenditure is rising, so this area should be a priority to give a boost to growth towards the future,” he said.
High Multiplier Effect
The economist stressed that several studies estimate the multiplier effect of public investment is relatively high in Peru.
Nevertheless, he added, the impact is limited at the moment and is not felt that much because there are two opposing forces: the national government –which raised its investment spending– and local, regional governments –where public investment contracts.
“In this sense, we estimate the favorable effect of public investment will be more noticeable in the second half of 2015 and will contribute to the recovery,” he continued.
(END) JJN/JJN/RMB/MVB
Published: 9/3/2015