Mounting Headwinds To Consumption, Investment In Peru Will Limit Growth In 2022

• Fitch forecasts that Peruvian real GDP growth will slow to 3.1% in 2022, from 13.3% in 2021, due to weaker domestic demand. In 2021, Peru was the fastest-growing among Latin America’s large economies as real GDP exceeded 2019 levels in every expenditure component except for exports. In Q4 2021, the economy grew 3.2% y-o-y. 
• Stringent lockdown measures in 2020 depressed private consumption and headline growth, but household incomes and spending surged in 2021 as the government maintained stimulus measures, a steady vaccination campaign allowed policymakers to loosen restrictions and Peruvians felt more confident in the broader recovery. 
• In 2022, private consumption is expected to be the main driver of growth; however, Fitch expects it will increase 3.3% this year, down from an 11.7% expansion in 2021. Notably, the country’s growth forecast was also revised down by the agency, from 3.6% previously. The revision is a result of elevated inflation and rising borrowing costs for households and businesses causing private consumption and investment growth to weaken over the coming quarters. 
• Growth will average 3.2% from 2023-2026 amid sustained private consumption and export growth, several downside risks to Fitch’s growth forecasts stems from the Russia-Ukraine hostilities and the potential for Chinese growth to underperform.

 (Source: Fitch Solutions)