Castilla Says Peru GDP Rebounding on Biggest Stimulus Since 2009

Peru’s economy is rebounding from the slowest growth in four years after the government expanded fiscal stimulus to offset a slump in metal exports and investment, Finance Minister Miguel Castilla said.

Gross domestic product will rise 5 percent in the second half of the year, after expanding a “disappointing” 3.3 percent in the first half, Castilla said at an event in Lima today. He reiterated his forecast for GDP growth of as much as 4.5 percent for the full year.

Mining investment in the world’s third largest copper producer is slowing after fueling GDP growth of an average 6.4 percent in the past decade, the fastest pace in South America. The government expanded stimulus measures last month to the equivalent of 1.6 percent of GDP to offset the “transitory shock” of lower metals, fishmeal and coffee output, Castilla said.

“One semester doesn’t take away all the progress our country has made and all its potential,” Castilla said. The economy “has passed the inflexion point” and the recovery “will be more tangible in the second half.”

Economic activity probably rose 1.6 percent in June, the slowest annual pace since the 2009 recession, according to the median estimate of 12 analysts surveyed by Bloomberg. The statistics agency is scheduled to release the figure tomorrow.

The Toromocho mine owned by Chinalco Mining Corp. International will add 100,000 tons to Peru’s copper output in the second half. Toromocho and the start up of the Las Bambas mine will add 1.2 percentage points to GDP in 2015, when the economy will expand 6 percent.

The new mines will allow Peru to overtake China to come the second largest copper producer after Chile, he said.

Castilla was speaking at Capital Markets Day 2014 organized by Lima-based Universidad del Pacifico.

Peru’s central bank unexpectedly lets interest rates unchanged last week saying the slowdown in economic activity is temporary and supply side inflation shocks are moderating more slowly than expected.

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