FocusEconomics: Peruvian economy picks up

FocusEconomics: Peruvian economy picks up

At its May monetary policy meeting, Central Bank of Peru (BCR) decided to keep the policy interest rate unchanged at 2.75%, the latest FocusEconomics’ Consensus Forecast Latin Focus May report recalled.

“The Bank’s decision took into account subdued inflation and declining inflation expectations. It also factored in below-potential, but strengthening, economic growth,” it noted.

As is known, inflation inched up last April after five consecutive months of decline. It came in at 0.5%, marginally above March’s over eight-year low of 0.4%.

“As a result, inflation remained well below the lower bound of the Central Bank’s target range of 1.0%–3.0%,” it pointed out.

A reversal of supply shocks and below-potential economic growth were again behind the subdued inflation reading. Inflation —not counting food and energy— continued to moderate, as did inflation expectations for the next 12 months.

Economic activity accelerated notably in the first two months of the year on the back of rising overseas sales, expanding public investment, solid credit growth, and domestic consumption.

As is known, growth had weakened significantly in the fourth quarter of 2017 due to the rocky political environment.

Moreover, unemployment —which had risen notably in both January and February— dropped in March.

Heading into the second quarter, the economy appears to be reaping the benefits of a more stable political environment following the resignation of former President Kuczynski in late March. Thus, he was replaced by Vice-President Martin Vizcarra. 

“Both business and consumer confidence jumped in April, and in the same month, public investment rebounded,” it stressed.