GDP in Peru

Peru - GDP

GDP growth jumps in final quarter of 2018

Economic growth accelerated considerably in the fourth quarter, owing to stronger domestic and external demand. Annual GDP growth in the quarter rose to 4.8%, which doubled the third quarter’s 2.4% year-on-year expansion. The reading brings growth for 2018 as a whole to 4.0%, well above 2017’s 2.5% expansion.

Fixed investment growth jumped (Q4: +5.8% year-on-year; Q3: +1.0% yoy), boosted by surging public investment in road infrastructure and robust public spending linked to the Pan American Games. Private investment, meanwhile, recorded a healthy expansion, supported by rising investment in the mining sector and low interest rates. Additionally, private consumption gained steam, increasing 3.8% year-on-year following Q3’s 3.3% expansion. Household spending was underpinned by strong credit growth, rising wages and growing employment. Meanwhile, government consumption swung from a 0.7% dip in Q3 to a 2.2% increase in Q4, due to soaring spending from local governments. Overall, domestic demand accelerated from a 3.0% expansion in Q3 to 3.8% growth in Q4.

The external sector’s contribution to growth swung from minus 0.5 percentage points in Q3 to plus 1.1 percentage points in Q4. Exports rose 2.6% in Q4, contrasting Q3’s 0.6% contraction. Notable increases were recorded in exports of agricultural, fishing and textile products. Reflecting cooling demand for consumer durables and capital goods for transport and industry, imports contracted 1.7% in Q4, contrasting the 1.2% expansion logged in Q3.

Solid GDP growth will likely carry over into 2019, underpinned by robust domestic demand and healthy commodity exports. Strengthening investor sentiment, coupled with supportive credit growth, are expected to fuel business investment, especially in the mining sector, while infrastructure spending should also continue to increase. Furthermore, sturdy employment growth and more upbeat consumer confidence will buttress private consumption. A pronounced slowdown in China’s growth and lingering global trade tensions represent the main downward risks.

Peru GDP Forecast

FocusEconomics panelists see GDP expanding 3.8% in 2019, unchanged from last month’s forecast, and 3.7% in 2020.