Peru’s Rebounding Economy Expected to Grow 3.1% This Year, Central Bank Forecasts

By Marco Aquino

LIMA (Reuters) – Peru’s central bank projects that the country’s economy will expand by 3.1% this year and by another 3.0% in 2025, according to a report released on Friday. This expectation reflects a hoped-for recovery following a 0.6% contraction in gross domestic product (GDP) last year.

Central bank president Julio Velarde remarked during a presentation that the forecasted growth rate of 3.1% may be "probably biased to the upside."

The central bank has revised its fiscal deficit forecasts upward, now anticipating a deficit of 3.3% of GDP for this year, an increase from a previous estimate of 2.8%. For next year, the forecast has been raised to 2.0% from an earlier prediction of 1.6%. Velarde attributed these adjustments to reduced revenue and increased public investment.

This year, Peru has implemented a regulation to not exceed a deficit of 2.8% of GDP. Velarde specifically highlighted government assistance for the state oil company Petroperu, which recently approved an additional $1.75 billion in funding following the resignation of its board members.

Financial support for Petroperu is expected to account for approximately 0.66% of GDP this year.

The monetary authority anticipates a trade surplus of $21.67 billion for the year, slightly below previous expectations, but still a new record, despite the pressure of lower prices and weakened demand prospects from China.

Additionally, the bank has slightly updated its inflation forecast for the year to 2.3%, up from an earlier prediction of 2.2%. This figure remains well within the central bank’s target range, which last week saw a reduction in the benchmark interest rate by 25 basis points to 5.25%.

Meanwhile, the government forecasts economic growth of 3.2% for this year and 3.1% for 2025.

In July, the economy saw growth of nearly 4.5%, marking the fourth consecutive month of expansion as it continues to recover from adverse climate conditions and anti-government protests that affected the vital mining sector last year.

The South American nation, a significant global supplier of copper, is currently facing extensive forest fires that have devastated farmland and affected some archaeological sites.