Peruvian Current Account Deficit Will Narrow As Imports Slump And Copper Exports Remain Strong

• Fitch Solutions forecasts that Peru’s current account deficit will narrow from 4.1% of GDP in 2022 to 2.1% in 2023, a downward revision of its previous figure of 2.5%, as slower import growth is offset by still robust copper exports.
• A stronger-than-expected slowdown in growth in May and June 2023 weighed on employment and private consumption, lowering import demand. Fitch has already seen a significant slowdown in imports since its last report.
• Meanwhile, exports have been and will remain robust, as Fitch’s commodities team remains optimistic about copper production over the next few years. Exports will make up approximately 25.9% of GDP in 2023 on the back of robust mining export growth. This will keep Peru’s goods trade balance firmly in surplus territory at 4.9% of GDP versus a 2015-2019 average of 1.8%.
• Copper production and exports will likely continue to drive a current account deficit below the pre-pandemic average in 2024 and leave the current account deficit at 2.3%.
• Although a fall in remittances is expected in mid-2024 due to a slowing U.S. economy and an uptick in unemployment is anticipated in Peru's manufacturing sector, the country is well-prepared. Peru has a solid cushion of liquid reserves despite its slowing economy, and its external debts remain manageable. Additionally, Peru has more than 12 months of import cover in international reserves, which will bolster external account stability in the upcoming quarters."

(Source: Fitch Solutions)