Peru GDP

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Peru: Economy shows signs of stabilization in Q3 on boosted public spending

November 21, 2014

GDP in Q3 expanded 1.8% over the same quarter of last year, which was slightly above the 1.7% increase observed in Q2. The reading just beat market expectations of another 1.7% rise. Although by no means stellar, the result suggests that the slowdown in Peru may be bottoming out. Sequential data support this view; GDP in Q3 grew 0.5% over the last quarter, which followed the 0.1% increase observed in Q2. The growth was driven by a steep rise in public spending as the government attempts to halt the sliding economy and counteract declines in the external sector, which deteriorated significantly in Q3.

Domestic demand grew 3.1% in Q3, which was up from the 1.8% increase tallied in Q2. Private consumption expanded 4.0%, which was roughly in line with the 4.1% expansion tallied in Q2. Government spending expanded 9.3% annually in Q3, which was well above the 4.8% increase tallied in Q2 and marked the highest level in nearly two years. Total investment contracted 1.2% in Q3, although this was not as severe as the 3.7% decline in Q2. Total investment was dragged down by fixed investment, which fell 3.0% (Q2: -4.0% year-on-year).

On the external front, exports of goods and services in Q3 dropped a substantial 9.8% over the same quarter last year (Q2: -2.5% yoy). Weakening external demand for important export commodities such as copper continues to weigh on output. Meanwhile, imports fell 4.5% in Q3, which was down from the 1.6% contraction registered in Q2. Consequently, the external sector’s net contribution to overall economic growth declined from minus 0.2 percentage points in Q2 to minus 1.4 percentage points in Q3.

The Central Bank sees the economy growing 3.1% in 2014 and expanding to 5.5% in 2015. LatinFocus Consensus Forecast panelists expect GDP to expand 3.0% in 2014, which is down 0.6 percentage points from last month’s projection. For 2015, the panel expects the economy to increase 4.9%, which is down 0.4 percentage points from last month’s forecast.


Author:, Economist

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Peru GDP Q3 2014

Note: Year-on-year changes of GDP in %.
Source: Peru National Statistical Institute (INEI) and LatinFocus Consensus Forecast


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