Peru Slashes Growth Outlook Amid Falling Copper Investment

  • Peru lowered its economic growth forecasts for 2023 and 2024 on Tuesday, August 29, amid poor weather, lower private investment in mining, and anti-government protests earlier this year.
  • According to Peru's official gazette, the economy ministry now projects that the country's economy will grow by just 1.1% this year, after data indicated a contraction in the economy during the first half of 2023. This is a significant downward revision from a prior estimate of 2.5% growth.
  • This figure would mark the slowest annual growth since 2009, excluding coronavirus-dampened 2020. The Peruvian Fiscal Council warned the forecast could still be too optimistic and could see further adjustments. Next year, Peru's economy is expected to grow 3.0%, the ministry added, down from a previous estimate of 3.4%.
  • As the world's second-largest copper producer, Peru is feeling the impact of falling copper prices, which have dropped from an average of $400 per pound last year to an estimated $380 this year and are projected to be $360 next year. While the metals mining and production sector is still expected to see a 7% growth this year, private investment—primarily in the mining sector—is anticipated to decline by 4.5%. This decline coincides with a slowdown in both the construction and manufacturing sectors of Peru.
  • The ministry also pegged Peru's estimated fiscal deficit for this year at 2.4% of gross domestic product (GDP), up from the 1.7% of GDP recorded last year. Meanwhile, Peru's estimated current account deficit was lowered to 1.6% of GDP, down from the 2.1% of GDP previously expected.
  • At a press conference on Tuesday, Finance Minister Alex Contreras pledged that the government is actively working to reverse these negative trends. He emphasized that inflation is on a declining trajectory, with the annual rate expected to ease to 4% by the end of the year. Contreras also noted that international companies, including those from the U.S., have expressed interest in Peru's petrochemical sector.

(Source: Reuters)