GDP in Peru

Peru - GDP

Growth hits multi-year high in Q2 on low base effect

According to a preliminary reading, GDP growth accelerated to 41.9% year-on-year in the second quarter, from 4.5% in the first quarter. That said, Q2’s reading was flattered by an extremely low base effect.

The upturn reflected improvements in private consumption, public spending, fixed investment and exports. Private consumption growth sped up to 28.3% year-on-year in Q2 from 2.0% in Q1. Public spending grew at the fastest pace in over a decade, expanding 30.2% (Q1: +9.3% yoy). Fixed investment growth accelerated to 174.1% in Q2, from 34.8% in the previous quarter.

On the external front, exports of goods and services bounced back, growing 48.8% in Q2 (Q1: -2.8% yoy). In addition, growth in imports of goods and services sped up to 44.1% in Q2 (Q1: +3.1% yoy), marking the best reading since Q4 1991. As a result, the external sector was balanced in Q2, neither contributing to nor subtracting from overall growth, improving from the 1.5 percentage-point subtraction in the prior quarter.

On a seasonally-adjusted quarter-on-quarter basis, economic activity dropped 0.1% in Q2, following the previous period's 0.3% contraction.

Commenting on Q2’s reading as well as the outlook for growth, Alberto Ramos, analyst at Goldman Sachs, said:

“Political uncertainty leading up to the 6 June presidential run-off, as well as the increased number of Covid-19 infections and fatalities during April and May, restrained the recovery in Q2. The high growth carry-over and the expected acceleration of economic activity in H2 2021, supported by a favorable external backdrop and improvement on the domestic healthcare situation, should lead to strong growth in 2021.”

FocusEconomics panelists project the economy to grow 9.4% in 2021, which is down 0.1 percentage points from last month’s forecast, and 4.4% in 2022.