The Peruvian economy did not grow in July and recorded a 1.29% decline: what does this mean? | economy

According to the National Institute of Statistics and Information (INEI), the decrease is explained by the decline of six sectors: agriculture (-0.69%), fishing (-47.94%), manufacturing (- 13.89%), construction (-). 8.80%), telecommunication and other information services (-2.15%) and finance and insurance (-9.60%).

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This is the second-highest contraction of the year – surpassing May with a 1.43% drop -, with July expected to be the month in which the MEF records its highest rate of the year. Additionally, it was the fifth lowest month in 2023.

Economist Paola Herrera of the Peruvian Institute of Economics and Enrique Castellanos, professor of economics at the Universidad del Pacifico, explained that in terms of primary sectors, the decline is due to the climatic events the country is facing. The contraction is explained by investment-related sectors such as construction and manufacturing, political instability and uncertainty in the business environment, such as low confidence of local and foreign businessmen.

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“Overall, we estimate that these investment-related sectors fell by 6.5% in July and that they have continued to fall for eight months,” Herrera said, adding that one of the factors in the decline in the construction sector was the contraction of the public. Investment by local governments.

An economic slowdown could lead to zero growth or economic contraction in the third quarter, Castellanos said, and to less than 1% growth for the rest of 2023.

“Eventually, you will see this decline or stagnation of GDP reflected in social indicators like poverty, malnutrition, life expectancy. want [problemas] Structure such as social conflict, poverty level and political issue. It is very difficult to cure it,” he said.

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Precisely, with lower growth, the poverty figure in 2023 will be at the level of 2022 or higher, Castellano pointed out.

Next year, Herrera, expects a first semester with a statistical recovery due to the sharp decline of sectors paralyzed by social protests at the beginning of the year, but eventually the risks of the El Niño phenomenon affect agricultural production. Difficulty in executing public works in subnational governments.

“We expect some stimulus from private spending. We hope the Reserve Bank will cut the benchmark rates. He has already done the descent from this month. Although they say it will not be continuous, we believe it will be done in the medium term. This may boost consumption and some investment. But there are many risks. There are, El Nino, this situation of business confidence will not improve, and how the state reacts to climate events that could affect not only agricultural production but also various infrastructures next year.

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employment

According to data released by INEI this Friday, the working population in metropolitan Lima increased by 4.2% in the June-July-August moving quarter compared to the same period in 2022.

At the level of adequate employment, the number increased by 4.2% comparing the two periods. However, this is still 3.2% below pre-pandemic levels.

On the other hand, unemployment fell by 0.6% between June, July and August to 22.7% in 2022 compared to the same period in 2019.

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Precisely, Herrera pointed out that quality employment is directly dependent on private investment, so if this aspect does not improve it could be “a very negative situation”. “Through this, the income of many families may be affected and this dynamism which is still maintained in sectors linked to consumption may be stopped,” he said.

At the sector level, construction employment in metropolitan Lima shrank 13.7% in the June-July-August moving quarter. Nationally, employment in the sector fell 13.1% in the second quarter.

“For example, the national employment decline in the second quarter was only 0.9%, but we don’t see how many low-quality jobs are being created. “This is a risk, first, because the decline in primary sectors where the majority of informal workers are employed and the decline in investment are already affecting employment in these sectors[constructionandmanufacturingHesaid[construcciónymanufactura”sostuvo[கட்டுமானம்மற்றும்உற்பத்தி”என்றுஅவர்கூறினார்[construcciónymanufactura”sostuvo