Peru: Economy maintains momentum in the final quarter
February 25, 2011
In the fourth quarter, GDP expanded 9.2% annually, according to Central Bank data. The reading was slightly below the 9.6% expansion observed in the third quarter (previously reported: +9.7% year-on-year) but beat market analyst expectations, which had the economy growing 9.0%. The fourth quarter reading represented the fifth consecutive quarter of expansion. In the full year 2010, the economy posted growth of 8.8%, which marked a solid recovery from last year's 0.9% contraction. Strong growth in the fourth quarter was fuelled by positive developments in the domestic sector, whereas the external sector continued to deteriorate, on the back of slower export growth. Total consumption posted a 6.7% expansion in the final quarter (Q3: +6.6% year-on-year) and gross fixed investment recorded another strong quarter, growing 22.6% annually (Q3: +27.5% yoy). In addition, domestic demand was favoured by an upward shift in inventories which contributed 2.0 percentage points to overall growth. Exports of goods and services decelerated sharply from a 7.0% expansion in the third quarter to a 2.7% increase in the fourth. Similarly, imports rose 23.4% year-on-year in the final quarter, below the 35.3% expansion observed in the third quarter. As a result, the net contribution from the external sector to overall growth stepped up from minus 5.5 percentage points in the third quarter to minus 4.1 percentage points in the fourth. At the sector level, the fourth quarter reading reflected strong, but slower growth in the services and industrial sectors. The agricultural sector, on the other hand, grew 6.5% in the final quarter of 2010, faster than the 2.7% increase observed in the third quarter. Meanwhile, Finance Minister Ismael Benavides stated that the economy can easily rise 7.5% this year. Central Bank President Julio Velarde has also stated that the economy may grow 7.0% in this year, suggesting that monetary authorities will revise their previous 6.5% estimate. For 2012, the Bank sees the economy expanding 6.0%.
Author: Ricardo Aceves, Senior Economist