Peru: GDP records sharpest contraction since Q4 2020 in the first quarter
The economy contracted 0.4% on an annual basis in the first quarter, contrasting the fourth quarter’s 1.7% increase. Q1’s performance marked the worst reading since Q4 2020.
The downturn was driven by weakening private consumption, fixed investment and exports. Household spending growth fell to an over-two-year low of 0.7% in the first quarter (Q4 2022: +2.3% yoy). Government consumption dropped at a slower rate of 6.0% in Q1 (Q4 2022: -11.2% yoy). Fixed investment contracted 10.7% in Q1, marking the worst reading since Q2 2020 (Q4 2022: +1.6% yoy).
On the external front, exports of goods and services fell 1.1% on an annual basis in the first quarter, which contrasted the fourth quarter’s 1.5% expansion. In addition, imports of goods and services deteriorated, contracting 5.0% in Q1 (Q4 2022: +2.4% yoy), marking the worst performance in over two years.
On a seasonally adjusted quarter-on-quarter basis, economic activity shrank 0.8% in Q1, compared to the previous quarter’s 0.1% contraction. Q1’s reading marked the sharpest downturn since Q2 2020.
Commenting on the outlook, Diego W. Pereira, analyst at JPM, stated:
“Following the 1Q23 national accounts report, 2023 GDP is revised lower to +1.9% year on year. That said, we maintain our call for GDP to bounce back in 2Q23, with activity regaining the levels observed back in 3Q22. […] Note that for GDP to log +1.9% yoy on average for the year, sequential growth would have to print above its potential also in H2 2023, which, given post-pandemic dynamics and tight monetary conditions, may well look on the constructive side. Despite the domestic demand poor performance, we expect net exports to continue contributing positively on the remainder of the year, on exports resilience and imports contraction.”