Peru Growth Slows as Fiscal Curbs Add to Investment Decline

  • Weak domestic demand offsets mining surge in second quarter
  • Private investment falls for tenth consecutive quarter

Peru’s economic growth slowed for a second consecutive quarter as public spending eased and private investment extended its deepest contraction in more than a decade.

Gross domestic product rose 3.7 percent in the second quarter from a year earlier, the government’s statistics agency said in an e-mailed statement. The figure matched the median estimate of analysts surveyed by Bloomberg and compares with a revised 4.5 percent increase in the first quarter.

Growth slowed as surging output from copper mines that were initiated during the years of high metal prices failed to drive up investment in other areas of the economy. The retail industry is suffering more than most, expanding at the slowest pace since 2009 in the second quarter as a weak labor market undermined demand. Still, business and consumer sentiment has surged in recent weeks on expectations the new government will ease regulation and reduce infrastructure bottlenecks.

“The upturn in business sentiment suggests we’ll see investment picking up from the fourth quarter, which will spur employment and consumer demand,” said Pablo Nano, an economist at Scotiabank Peru in Lima.

Public investment rose 2.2 percent from the year earlier after surging 30 percent in the first quarter, while private investment fell 5.5 percent, the tenth consecutive contraction, the agency said. The mining industry expanded 29 percent as copper output jumped 35 percent, while construction grew 1 percent.

The copper surge, which is helping Peru outperform other major economies in Latin America, will slow next year and infrastructure projects will become the main growth driver, BBVA Banco Continental said Aug. 17.

Economists surveyed by Bloomberg expect Peru to grow 4 percent next year, more than double the average pace for the region.

“Some companies put their projects on hold until after the election,” Nano said. “There are about $18 billion of delayed infrastructure projects that the new government is expected to get moving.”

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