Country Report Peru January 2009

Outlook for 2009-10

• Social unrest is set to increase in the coming year. Administrative inefficiencies and political fragmentation will impair the effectiveness of policies aimed at mitigating the impact of the global economic downturn.
• The government's attempts to deliver on pledges of improved social conditions will be hindered by weak implementation capacity; this will boost the appeal of the opposition ahead of the 2011 presidential election.
• Policymakers are relatively well placed to mitigate the damage inflicted on the domestic economy by the global financial crisis, owing to Peru's sound public finances and a comfortable cushion of international reserves.
• Economic growth will slow to 3.1% in 2009 as external demand weakens sharply. Growth in 2010 will rise to 4.1% as US demand begins to recover andtogether with new investmentboosts export volumes.
• Despite vigilant monetary policy and sharply slowing demand, consumer price inflation will remain above the official target of 1-3% in 2009; we expect inflation to fall back within the target range by mid-2010.
• Following the deepening of the global credit crisis and global recession in 2009, we expect the nuevo sol to be weaker than previously forecast, ending 2009 at Ns3.37:US$1 and 2010 at Ns3.46:US$1.

Monthly review

• Although Peru's hosting of an APEC summit at the end of 2008 provided a boost for the president, Alan Garcia, his government suffered a politically costly setback over cabinet salaries in January.
• The government revealed details of a Ns10bn (US$3.2bn, 2.5% of GDP) fiscal stimulus package in December as part of its effort to combat the impact of the international financial crisis on the Peruvian economy.
• Lower global mineral prices have already begun to have a negative impact on the fiscal accounts in the form of slumping corporate tax collections.
• Real GDP growth slowed to its weakest rate in more than two years (5.1%) in November as a result of a shorter work month and a poor fish harvest.
• Consumer prices increased by 0.36% in December, keeping 12-month inflation at 6.7%the same rate as recorded in November, when inflation reached its highest point since 1996.
• In November, the value of Peru's traditional exports fell by 23% year on year, the weakest performance in more than a decade, following meagre receipts for minerals and petroleum products.

Source: Country Report

This report covers the following industry codes:
SIC Code: 1
NAICS Code: 11

This report covers the following industry codes:
SIC Code: 1
NAICS Code: 11