Moody's Investors Service today said Peru’s economic growth over the next year will be driven mainly by the public sector spending, stronger employment and firmer consumer confidence.
The announcement is part of a new report from the credit rating agency, "Latin America's Middle Class Growth Slows, Tempering Prospects for Retailers, Banks and Homebuilders.
The document suggests that business confidence and investment have declined so far this year, reflecting investors' concerns about global demand for the country's mining exports.
In addition, an inefficient bureaucracy, at both local and regional levels, has created more impediments to investment, which the authorities have sought to mitigate. However, the positive impact of reforms will begin to be felt only next year.
The leading provider of credit ratings, research and analytics also highlighted that, in comparison with Argentina, the economic outlook is a bit more optimistic for Mexico, Colombia and Peru, where the main growth driver will be government spending.
"Investment and government spending, and not consumer spending, will lead the modest expected recovery for most of the region in 2015," says Gersan Zurita, a Moody's senior vice president and co-author of the report.
Moody's is forecasting that growth in Argentina, Brazil, Chile and Peru will fall below the average growth rate during the 2004-13 period.
Mexico is the only country where growth will exceed its historical average, but that is small consolation given its tepid growth during the past decade.
"Investment and government spending, and not consumer spending, will lead the modest expected recovery for most of the region in 2015," adds Zurita.
The report also states that, in Chile and Peru, an economic slowdown this year has cooled consumer spending, while declines in mining investment and global prices for both countries' export commodities have resulted in slower growth.
It also notes that Latin America's middle class growth is moderating after a steady rise during the past decade, and that this slowdown will likely have a broad economic impact, but will especially affect certain industries.
Among the worst affected companies will be retailers, auto manufacturers, homebuilders, airlines, and sellers of high-ticket, credit-dependent and non-essential items.
"Economic growth throughout Latin America is slowing down, with growth in the first half of 2014 lower than we expected, negatively affecting both consumption and investment," claims Zurita.
He said this situation follows a decade of strong economic growth, rising wages and increased consumer spending, which have lifted more Latin Americans into the middle class than ever before.
(END) AQR/AQR/RMB
Published: 9/23/2014