GDP in Peru

Peru - GDP

Economic growth wanes in the third quarter

GDP growth waned to 1.7% year on year in the third quarter from 3.3% in the second quarter. Q2’s reading marked the slowest expansion since Q4 2020. A downturn in foreign sales and cooling private spending domestically were behind the deceleration.

Household spending growth declined to 3.5% year on year in Q3, compared to the 4.9% expansion in Q2, as household consumption felt the pinch of soaring inflation, depressed sentiment and higher interest rates. Meanwhile, private investment dropped, declining 0.8% in Q3, contrasting the 0.8% increase logged in the previous quarter amid falling investment in the mining sector. On the other hand, public investment growth surged 11.6% in Q3 from 0.5%, mainly due to increased spending by local governments. Overall, fixed investment growth ticked up from 0.8% in Q2 to 1.3% in Q3. Lastly, public consumption dropped at a sharper pace of 6.3% (Q2: -3.0% yoy) due to reduced Covid-19-related health expenditure.

Exports of goods and services growth moderated to 0.8% in Q3 (Q2: +9.0% yoy), due to falling foreign sales of mining and hydrocarbon products amid continued social unrest. Conversely, imports of goods and services growth sped up to 7.4% in Q3 (Q2: +2.2% yoy).

On a seasonally-adjusted quarter-on-quarter basis, GDP growth accelerated, increasing 1.2% in Q3, following the previous quarter’s 0.5% increase.

Our panelists expect Peru’s economic growth to remain weak next year, weighed on by falling real wages, decreasing investment due to policy uncertainty, and higher interest rates. Momentum will also be subdued amid a weak global growth panorama.

FocusEconomics panelists project the economy to grow 2.6% in 2023, which is down 0.1 percentage points from last month’s forecast, and 2.3% in 2024.