Peru Pestle

Topics: Economic growth, Macroeconomics, Gross domestic product Pages: 21 (5167 words) Published: August 25, 2010
Country report PERU

Summary Now that the worst of the economic crisis is over, the balance can be made up for Peru as well. GDP growth will fall to 1% in 2009, a steep drop from the 9.8% registered in 2008. However, in comparison to its peers, this can be considered a good result. Monetary and fiscal stimuli have supported growth so far. However, with regard to the fiscal stimulus, the bottom of the treasury chest is in sight. On the back of higher spending and falling revenues, the budget deficit will deteriorate sharply to -3.4% of GDP this year. Inflation, however, is not a concern at this time, as the contraction of domestic demand and investment will drive down inflation to 3.2% by the end of this year. However, Peru continues to face structural impediments to growth. Exports are recovering, with demand from Asia being an important driver, but remain hinged on primary exports. As exports are growing more rapidly than imports, the current account will improve to a deficit of 0.6% of GDP. The downside is that the currency will appreciate as a result. This hurts trade and hampers the recovery. With regard to its external solvency, Peru is in a good position. Foreign debt is low and the level of FX-reserves is still high at USD 28bn. On the political front, President Alan García is losing popularity and authority on the back of the continuing social opposition by part of the population. His approval rating has dropped to 20% and it will be a difficult task to regain popularity before the 2011 elections. A rapid economic recovery would make this task easier. Things to watch: • • • • Shape and speed of economic recovery Deteriorating fiscal situation Currency appreciation Political environment in face of public unrest Erwin Blaauw Country Risk Research Economic Research Department Rabobank Nederland P.O.Box 17100, 3500 HG Utrecht, The Netherlands +31-(0)30-21-62648 Rabobank Economic Research Department Page: 1/8


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November 2009

Country report PERU

National facts Type of government C apital Surface area (thousand sq km) Population (millions) Main languages Main religions constitutional republic Lima 1,285 28.7 Spanish Quechua Roman C atholic (81.3%) Evangelical (12.5%) Foreign trade (2008) Head of State (president) Head of Government Monetary unit Economy (2008) Economic size Nominal GDP Nominal GDP at PPP Export value of goods and services IMF quotum (in mln SDR) Economic structure Real GDP growth Agriculture (% of GDP) Industry (% of GDP) Services (% of GDP) Standards of living Nominal GDP per head Nominal GDP per head at PPP Real GDP per head bn USD 127 246 35 638 2008 9.8 8 27 53 USD 4385 8458 3518 % world total 0.21 0.36 0.18 0.29 5-year av. 6.5 9 27 53 % world av. 45 76 44 Openness of the economy Export value of G&S (% of GDP) Import value of G&S (% of GDP) Inward FDI (% of GDP) 28 27 3.2 Alan Garcia Perez Alan Garcia Perez nuevo sol (PEN) Main export partners (%) US C hina C anada Japan Gold C opper Fishmeal Zinc Main import products (%) Intermediate goods C apital goods C onsumer goods 51 32 16 18 14 7 6 Main import partners (%) US C hina Brazil C hile 24 10 7 5 18 24 6 5 Social and governance indicators Human Development Index (rank) Ease of doing business (rank) Economic freedom index (rank) C orruption perceptions index (rank) Press freedom index (rank) Gini index (income distribution) Population below $1 per day (PPP) rank / total 79 / 179 62 / 183 57 / 179 72 / 180 108 / 173 49.6 4.2%

Main export products (%)

Source: EIU, CIA World Factbook, UN, Heritage Foundation, Transparency International, Reporters Without Borders, World Bank.

Economic structure and growth With 28.7 million inhabitants and nominal GDP of USD 127bn, Peru is classified as a lower-middle income country by the World Bank. However, Peru’s is near the upper band of this category. In the past 20 years, Peru has made significant steps up the development ladder. GDP...
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