Peru: Growth sinks to four-and-a-half-year low in Q2
August 22, 2019
Economic growth halved to 1.2% year-on-year in the second quarter, from a revised 2.4% expansion in the first quarter (previously reported: +2.3% year-on-year), marking the slowest expansion since Q4 2014. According to the data released by the Central Bank on 22 August, faltering external demand drove the slowdown.
Despite the weaker expansion, domestic activity accelerated in the second quarter. Notably, fixed investment growth sped up to 5.3% year-on-year (Q1: +1.1% yoy), amid upbeat mining investment, while government spending rebounded by 1.7%, after falling 2.7% in the first quarter. Less encouraging, however, household spending lost stride in the second quarter (Q2: +2.5% yoy; Q1: +3.2% yoy), despite a fall in unemployment.
The external sector subtracted 0.8 percentage points from growth in Q2, following the revised 0.8 percentage-points contribution made in Q1 (previously reported: +0.6 percentage points). Exports contracted 2.9% in Q2 (Q1: +2.6% yoy), while imports rebounded by 0.2% (Q1: -0.4% yoy).
Growth should pick up in the second half of 2019, following a weak H1. That said, 2019 as a whole will mark a significant cooling in growth, due to feebler fixed investment, especially in public infrastructure, and amid a sharp slowdown in merchandise exports. Lingering political uncertainties at home and persistent global trade tensions cloud the outlook.
Author: Nicolás J. Aguilar, Economist