Peru's efforts to improve its political scenario to spur gross domestic product (GDP) are contributing to the unblocking of halted investment projects, Moody's Sovereign Risk Group Vice-President Jaime Reusche affirmed.
During an interview with El Peruano official gazette, Reusche anticipated a significant upturn in Peruvian economy by end-2017 as the Andean nation betters its political conditions.
The senior analyst highlighted President Pedro Pablo Kuczynski's approach in terms of speeding up infrastructure projects, outlined in his
July 28 Address to the Nation.
In this sense, Reusche noted the President's acknowledgment of unexpected hurdles —aside from Coastal El Niño disasters and the Lava Jato corruption scandal— "is something that contributes to confidence."
"Recognizing where the most relevant challenges are gives him [Mr. Kuczynski] a lot of credibility, as the government now understands the nature of hurdles," he pointed out.
Executive-Legislative dialogue
"There are two political forces —Executive and Congress— which should agree a lot on their vision and economic policies."
In this respect, Reusche affirmed consensus between both government branches would positively impact economic reactivation, thus helping "re-start [Peru's] growth engines."
Investments
On the other hand, the expert underscored the role of public investment in overcoming the economic slowdown.
"Once [public investment is] reactivated, the private sector will feel more confident to inject further capitals," he projected.
"The economy has reached a level of development that makes private investment highly sensitive to political conditions, as well as to various other variables —like the smooth running of public spending— that were previously not as pivotal to spur the business sphere," Reusche explained.
Updated forecast
Lastly, Reusche affirmed Moody's 2018 growth forecast for the Inca country remains unchanged at 3.9%.
"However, if Peru achieves political consensus and if public investment project execution increases in the remainder of 2017, we will most likely revise our estimate for next year upwards," he projected.
"What's more, the foundations and conditions for further GDP growth are there. The only thing left to do is to translate the private sphere's confidence into real investment," Reusche concluded.
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