Peru in recession: Risk-rating agencies cut economic growth below 1%

Rating agencies predict Peruvian GDP growth of less than 1%. Photo: Composite Infobae/Andina/Getty

In recent estimates Graders International Risk There is a worrying decline in growth projections for the Peruvian economy. In particular, Moody’s, Fitch Ratings and Standard & Poor’s They downgraded their ratings due to risks associated with weak governance, political instability and growth prospects.

A recent Fitch Ratings report, shared with Kestion, points to economic disruption stemming from political dysfunction and social unrest, which could have a lasting impact on the country’s macrofiscal trajectory until the end of 2025.

This situation is bad Technological stagnation In which the The Peruvian EconomyWith GDP falling in recent quarters, in addition Private investment.

“We have lowered our growth forecast for 2023 1,8% and 0,8%. “The outlook faces risks from a stronger-than-expected El Niño event and renewed political instability that could affect investment and growth prospects,” they noted.

The Peruvian economy will have a negative result in 2023, data not seen since the 90s. Photo: Composite Infobae/Andina

For its part, the American Rating Agency Standard and poor Unique factors and surprises in his report GDP performance Major reasons for their downward adjustment in forecasts. In their calculations, they decrease from 1.8% to 0.9%.

On the other hand, Moody’s warned Economic recession in Peru Alex Contreras, the Minister of Economy and Finance, accepted the term as a result of the continued contraction of the national product. In updating its GDP growth outlook, it cuts its forecast 1,3% and 0,6% with downside risk.

The situation of financial insufficiency is also worrying rating agencies. In the case Fitch, the fiscal deficit is projected to exceed its ceiling of 2.6% in 2023 due to low income and copper prices. Despite these challenges, the government is implementing plans to reactivate and mitigate climate events, although the effectiveness of the deficit will depend on the gradual elimination of spending. International distribution.

To reverse this situation, a shock of confidence, restructuring in the public sector, incentives for micro and small businesses and Social programs to reduce poverty and promote employment. A revival of private investment, particularly in mining projects, is seen as essential to improving business confidence and spurring growth. Economic development.

However, political obstacles persist, preventing the implementation of major projects such as Día María in Arequipa. This has led to criticism of a lack of political will to open up viable projects economy.

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Despite these challenges, analysts are optimistic Private investment And strong announcements will help revive business confidence and improve the country’s economic position.

Peru’s Economy Minister Alex Contreras in an archive photo. EFE/ Paolo Aguilar

Consultants prefer Macroconsult, Peruvian Institute of Economics (IPE), gridBanks like Videnza and BCP and Barclays (London) have also adjusted their forecasts. Development of the Peruvian Economy. Among them, four predict that the country’s GDP will close in negative territory in 2023, while others indicate that the growth of the economy will be zero.

According to the list, the investment bank Barclays It predicts that the Peruvian economy will collapse by the end of 2023 -0.6%IPE and phase consultants (-0.3%), Macroconsult (-0.2%), BCP (0%), Videnza (0.2%), Risk Assessment Institute Moody’s (0.6%).

According to economist Luis Arias Minaya, the challenge for the Ministry of Economy and Finance is to prevent growth from turning negative at the end of 2023, which has only happened twice in the 90s (1992 and 1998). “We need to revise the fiscal deficit from 2.8% to 2.4% because it is difficult,” he pointed out.

The last forecast by the Ministry of Economy and Finance was given at the end of August. According to the multi-year macroeconomic framework (MMM) published in El Peruano’s official newspaper, the gross domestic product (GDP) growth forecast has been adjusted from 2.5% to 1.1%, as economic activity worsened in the first half. year (January to June) affected Social conflictAdverse weather shocks like Cyclone Yaku And this El Niño Event (FEN)as well as less favorable financial conditions and external environment.

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