Peruvian economy: “We are growing, but little and very slowly; private investment remains at 0% and prices will continue to rise”

We continue in a difficult economic outlook, and although Peruvians ‘manage’ day to day, adequate employment is not recovering and the rise in prices will continue.

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Of January to July the Peruvian economy grew 3.22% Y in July (Month of National Holidays, which used to be of high growth) only 1.4%., despite the withdrawals of AFP and CTS.

“It is not that ‘we are falling’, we are growing, but very slowly and in a very negative context of the world economy, with high prices at the international level. And as for our exports, although they had a record, they were able to grow more, especially in mining”, said Mónica Muñoz-Nájar, economist at the Development Studies Network (REDES), to Trome.

Lack of adequate employment and salaries reach less and less

Economic growth is related to employment. If the economy does not grow enough, it takes much longer for jobs to recover (This, although it has continued to grow, needs to reach pre-pandemic levels).

“The average income at the national level is S/1,525 and in 2019 it was S/1,571; although it could be said that ‘the difference is not much’, this reaches less and less because prices are now much highers. In addition, although many people have returned to work, they are underemployed and do not earn even the minimum wage.indicated Trome Muñoz-Nájar,

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“The explanation for this price increase is basically in the international context. Internally, they affect management issues, such as the shortage of urea,” said Mónica Muñoz-Nájar / Redes, (Interview: Isabel Medina / Trome)

Mining production fell.

What has had the greatest impact on the lower economic growth is “That mining production (especially copper, molybdenum and silver) has fallen 5.8% in July.”

Investments are another component of growth“but the BCR has indicated that, in addition to the fact that public investment will be very small, this year private investment will grow ‘zero‘; then that will not compensate a bit for the drop in production either.”, explained the REDES specialist.

With such an adverse external factor, domestic policies should be sounds, but these days we have heard again about caps on interest rates, changes in the economic chapter of the Constitution, and this is added to months of mismanagement of social conflicts and urea purchase processes, all of which gives a sign of trust Muñoz-Nájar also supported Trome.

Drop in mining production in July affected economic growth.
Drop in mining production in July affected economic growth.

price hike

The Central Reserve Bank raised its projections for inflation (continuous price increase) from 6.4% to 7.8% at the end of the year. “That means that prices will still be high and rising more than expected. The BCR indicated that we will have the highest inflation in 26 years (since 1996 we had such a high inflation rate),” he explained. Munoz-Najar.

The economist argued that The explanation for this price rise, for the most part, is from an external (international) context. due to factors such as: energy, the price of corn, wheat, soybeans that have dropped, but only a little; and oil”. Internally, they have affected management issues, such as the urea shortage, which will possibly also complicate prices for next year.

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"The explanation for this price increase is basically an international context.  Internally, they affect management issues, such as the shortage of urea"pointed out Mónica Muñoz-Nájar/ Redes, (Interview: Isabel Medina / Trome)
“The explanation for this price increase is basically in the international context. Internally, they affect management issues, such as the shortage of urea,” said Mónica Muñoz-Nájar / Redes, (Interview: Isabel Medina / Trome)
"The explanation for this price increase is basically an international context.  Internally, they affect management issues, such as the shortage of urea"pointed out Mónica Muñoz-Nájar/ Redes, (Interview: Isabel Medina / Trome)
“The explanation for this price increase is basically in the international context. Internally, they affect management issues, such as the shortage of urea,” said Mónica Muñoz-Nájar / Redes, (Interview: Isabel Medina / Trome)

What will the State do: More bonds?

“It is time to protect the most vulnerable population, the poorest. The state has planned food bonus, but this situation of rising prices will continue. Will he give another bonus, expand Qali Warma, what will he do? ”, questioned Mónica Muñoz-Nájar, an economist from the Development Studies Network (REDES).

Know that:

  • The tendency It’s a slowdown in growth.
  • To generate quality employment, 5% growth would be needed. The current 3.22% is not enough.
  • Just in September 2023 we would return to a ‘normal’ situation, with inflation within the BCR’s target range: between 1% and 3% per year.
  • In July it was recorded 87 cases of social conflicts related to mining activity, reported the Ombudsman’s Office.
"The explanation for this price increase is basically an international context.  Internally, they affect management issues, such as the shortage of urea"pointed out Mónica Muñoz-Nájar/ Redes, (Interview: Isabel Medina / Trome)
“The explanation for this price increase is basically in the international context. Internally, they affect management issues, such as the shortage of urea,” said Mónica Muñoz-Nájar / Redes, (Interview: Isabel Medina / Trome)

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