Peru: Economy loses steam in second quarter
August 29, 2011
In the second quarter, GDP expanded 6.7% over the same period last year, which represented a deceleration compared to the 8.7% expansion observed in the first quarter. The reading was broadly in line with market expectations that GDP growth would slow to 6.5% and marked the slowest expansion since the first quarter of 2010. The second quarter outturn reflected weaker domestic demand, while the external sector improved slightly over the previous quarter. Domestic demand grew 8.2% in the second quarter (Q1: +10.5% year-on-year), on the back of slower growth in total consumption (Q1: +6.3% yoy; Q2: +5.8% yoy) and a marked deceleration in investment (Q1: +12.3% yoy; Q2: +4.8% yoy). On the other hand, the external sector improved somewhat compared to the previous three-month period, with exports of goods and services growing at the fastest pace in more than three years (Q1: +4.1% yoy; Q2: +12.5% yoy). Imports speeded up from a 13.7% increase in the first quarter to a 19.8% expansion in the second. As a result, the net contribution from the external sector to overall economic growth improved from minus 2.1 percentage points in Q1 to minus 1.7 percentage points in the second quarter. At the sector level, the second quarter slowdown was broad-based, with both primary and non-primary sectors decelerating compared to the previous quarter, particularly mining, which contracted for the fourth consecutive quarter. The new government, led by Ollanta Humala, anticipates that the economy will grow between 6.5% and 7.0% this year.
Author: Ricardo Aceves, Senior Economist