Macchu Picchu Peru

Peru GDP Q3 2023

Peru: GDP records sharpest contraction since Q4 2020 in the third quarter

GDP dropped at a quicker rate of 1.0% year on year in the third quarter, below the 0.5% contraction tallied in the second quarter. Q3’s reading marked the worst since Q4 2020. On a seasonally adjusted quarter-on-quarter basis, GDP fell 0.1% in Q3, matching the previous quarter’s contraction.

Household spending contracted 0.1% in Q3, marking the worst result since Q4 2020 (Q2: +0.4% yoy), as continued social unrest weighed on consumer sentiment and still-elevated inflation dented purchasing power. Government spending accelerated somewhat to a 2.8% expansion in Q3 (Q2: +2.7% yoy). Meanwhile, fixed investment declined at a milder albeit still-considerable rate of 5.9% in Q3, from the 6.5% decrease recorded in the prior quarter, restrained by shrinking mining and non-mining private investment and a downturn in sub-national public investment..

On the external front, exports of goods and services growth decelerated to 0.4% in Q3 (Q2: +7.0% yoy), due to lower shipments of non-traditional textile, agricultural, livestock and fishery products. Meanwhile, imports of goods and services contracted 1.8% in Q3 (Q2: -3.0% yoy), constrained by lower purchases of industrial inputs, capital goods and non-durable consumer goods amid lower manufacturing activity and private spending.

GDP should grow at a significantly faster pace next year compared to 2023. Declining inflation and looser financing conditions will translate into a faster expansion in household spending and a rebound in investment activity. That said, El Niño-associated weather events and lingering political uncertainty pose downside risks.

Commenting on the outlook, analysts at Itaú Unibanco stated:

“Our 2023 GDP growth forecast of 0.2% has a downward bias given a weaker than expected Q3 2023. Activity will likely recover in Q4 2023, although at a moderate pace. Authorities expect a moderate/strong el Niño scenario for 1Q24 which will likely slow the expected recovery, resulting in a 3.0% growth rate for the year.”

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