World Bank: Global risks affecting Peru's economy | Poverty China | economy

According to Tanja GoodwinA senior economist at the World Bank's regional office in Peru is experiencing a five-year period with the lowest growth since the 1990s.

“(Growing less) has important consequences for reducing poverty and achieving the Sustainable Development Goals, but governments have the opportunity to respond to this adverse situation with a strategy to accelerate investment.”, he said during the Panorama 2024 Forum: Perspectives and Risks, organized by AmCham Perú.

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He explained that the risks for this year are as follows: Geopolitical tensions and conflicts, global trade fragmentation, climate disasters, financial stress and many others.

He also pointed out that countries with high debt holdings and troubled financial conditions are those that do not manage their economies in a disciplined manner.

On the fragmentation of the World Trade Organization, Goodwin He pointed out that industrial or geopolitical tensions between blocs such as China and the US have begun to impose barriers in this area.

“In addition, supply chains are being restructured, and this is a contraction of commodity trade. This worries many Latin American countries, where exports account for up to 40% of their GDP.”, he revealed.

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He explained that Chile and Peru They will have a huge impact on their economies as both are heavily dependent on China.

“China's growth has been driven by investments, but now we're seeing weakness in the real estate sector, which translates into a contagion for consumer confidence. That's important because China is changing its economic model, which will become more consumption-oriented.“, I observe.

As is known, this Asian country is in great demand of metals, especially copper, but an effect on mineral prices is yet to be seen.

“But moving forward, If China's economy is weaker than expected, strong impact (downward metal prices)This is offset by new demand for metals due to the energy transition, a World Bank representative said.

Another point he elaborated on was that geopolitical tensions, particularly the flare-up of the Middle East conflict, could increase oil prices and drive capital out of developing countries.

“Geopolitical risks have increased sharply, and although this has not yet involved major oil producers, if it does, we could see a sharp rise in oil prices and that would create new inflationary pressures.“, he said.

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Factors that drive investment

Goodwin said that even when a global environment is perceived to be slowing, there are opportunities to take advantage of periods of investment acceleration. He asserted that emerging developing markets are more profitable than advanced economies.

How to achieve it? A senior economist at the World Bank's regional office in Peru noted that governments must Improving fiscal, monetary and structural policies such as trade and financial transparency.

On the institutional side, he stressed that there should be legal stability and a better judicial system, rule of law, enforcement of contracts, improved regulatory frameworks, and a sound investment climate.