Velarde Sees No ‘Clear Signs’ of Slowing in Peru Economy

Peruvian central bank President Julio Velarde said he sees no clear signs of deceleration of the country’s economy.

The bank president, speaking during a presentation of the central bank’s quarterly inflation report today in Lima, said that the country’s economy would post year-on-year growth of 5 percent in the fourth quarter

South America’s sixth-biggest economy will expand 6.8 percent in 2011 and 5.5 percent next year, according to today’s report, compared with the Sept. 16 forecasts of 6.3 percent and 5.7 percent respectively. He said that the economy’s potential is for 6.4 percent growth.

Velarde attributed the revisions to the global economic slowdown, adding that global demand concerns will affect investment more than concern about anti-mining protests locally.

Peru’s recent manufacturing decline is worrying, Velarde said, but he expects it to be temporary given U.S. economic growth. The decline is more a result of a “fear of recession in the U.S. rather than actual recession.” Velarde said that he doesn’t perceive any significant slowdown in credit growth.

Mining, Commodities, Rates

The bank chief said that he does see a deceleration in mining investment projects in Cajamarca region though if all projects are completed this will be “the most exceptional” decade for mining investment. He sees exports dipping next year, and a rise in 2013 as new mines start production.

Velarde said he expects commodity prices to stay at high levels on China next year on the whole, with copper lower while gold and oil will be higher. He sees lower import prices for Peru.

Regarding central bank monetary policy, Velarde said that policy makers have kept rates on hold because they see demand and economic growth staying below potential at the same time that inflation expectations are within target.

The bank has kept the overnight rate at 4.25 percent since a quarter point increase at its May 12 meeting.

Peru rate policy is neutral and what happens in the world economy will determine whether next move is a rate rise or rate cut.

The sol was little changed at 2.6974 per dollar at 1:53 p.m. New York time from 2.6962 yesterday.

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