Macchu Picchu Peru

Peru GDP Q2 2020

Peru: GDP records largest drop on record in Q2 amid coronavirus pandemic

The economy contracted a record 30.2% on an annual basis in the second quarter, following the first quarter’s 3.5% decrease, as a strict nationwide lockdown and border closures to fight Covid-19 pummeled activity.

The downturn was broad-based, with private consumption, fixed investment, public spending and exports all plunging. Private consumption fell at a more pronounced pace of 22.1% year-on-year in Q2 compared to the 3.5% decrease in Q1. A sharp deterioration in the labor market along with social isolation measures drove the drop. Fixed investment nosedived 62.0% in Q2, from the 13.0% contraction logged in Q1, amid the uncertain backdrop from both Covid-19 and upcoming elections. Meanwhile, public consumption shrank 3.9% (Q1: +6.0% yoy) but should pick up ahead as fiscal stimulus kicks in.

Exports of goods and services collapsed 43.6% in Q2 (Q1: -9.6% yoy) as business closures in Peru sapped output and demand dried up abroad amid widespread lockdowns. In addition, imports of goods and services contracted at a pronounced pace of 30.5% in Q2 (Q1: -5.8% yoy), reflecting the weak domestic economy.

On a seasonally-adjusted quarter-on-quarter basis, GDP contracted 26.7% in Q2, which followed Q1’s 6.4% decrease. Q2’s result marked an all-time low and confirmed that Peru is in a technical recession.

Despite the dire Q2 results, Paulo Mateus, senior economist at Goldman Sachs, highlighted the potential for a strong rebound in Q3:

“The deep, unprecedented real GDP contraction in 2Q2020 reflected the strictest quarantine measures implemented across LatAm. However, the 2Q national accounts figures show a fairly outdated picture, since real GDP has recovered significantly on a sequential basis during May and June. In fact, the carry-over for 3Q2020 from the June level stands at +12.1% qoq sa.”

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