Recently, BBVA Research adjusted the economic growth projection for this year. In the following interview, its chief economist explains the factors that motivated this revision of the forecasts and the expectation about who will be in charge of the BCR in the next government.
They revised upward the economic growth projection for 2025 from 3.1% to 3.3%. What was not considered in the initial forecasts?
Basically, the third quarter data was more favorable. We continue to see strong momentum on the spending side linked to domestic demand and, on the sectoral side, support from non-primary sectors, which continue to grow at rates slightly above 3%. In particular, in that quarter there was also growth in the primary sectors. That generated better growth results than we had anticipated.
What factors influenced the growth of domestic demand?
Domestic demand is growing at a rate of 6% year-on-year. Within it, the most dynamic component was private spending. And within private spending, private investment accelerated. In the first quarter it grew 8.9%, in the second slightly above 9% and in the third quarter it grew 11.4%. Private consumption has also remained above 3.5%, despite the fact that, in the third quarter of last year, with which it is compared, there were still effects of pension withdrawals. Employment is growing, wages are growing, the quality of employment is improving and the underemployment rate is falling.
Is it striking that the growth of the economy has not altered with the fall of Boluarte?
That is the question that international investors often ask. I would say that this apparent divorce between politics and the economy, in particular, is explained because the foundations of the economy remain solid. On the one hand, there is the issue of price stability itself. For 29 years in Peru, interannual inflation has not exceeded one digit. The second element has to do with our external accounts, which reflect some favorable effects such as high terms of trade. Today we are at the best level for 70 years. And finally, while there has been a recent deterioration on the fiscal side, the accounts still look pretty good.
Could citizen insecurity have prevented the Peruvian economy from growing more?
Yes. We are still at levels below the Latin American average, but what is worrying is the speed, the rise of this type of indicators. Insecurity clearly creates a complicated problem for you, it generates and increases uncertainty. The person who invests does not take advantage of the risk he assumes when making a venture, an investment, and that obviously inhibits the investment itself. In addition, resources are diverted to seek greater security instead of putting those resources into investment.
And could this affect next year?
Yes, because we are not yet seeing that this issue has been contained. I understand that the Government is making some efforts, but we still do not see concrete results. Taking a conservative position, we think that this issue is even more structural and can inhibit growth not only next year, but subsequent years if not contained. Unfortunately, we have seen experiences where, once crime begins to rise, it then becomes a very complicated issue to contain, here in Latin America. I’m not saying it very far.
How does the market evaluate Julio Velarde’s continuity at the Central Bank after the elections?
If Julio Velarde stays, it would be exceptionally good news. Of course, Julio Velarde has led the Central Bank with great professionalism and has elevated our monetary institution to an international level. The Central Bank of Peru today is a global benchmark. If Julio stays, I think it would be very welcome news for the markets, for the economy in general. But if finally the authorities that take office at the end of July of next year do not ratify it, or if Julio Velarde decides to step aside, the Central Bank has a very powerful legal scheme that, as long as that does not change, provides guarantees so that price stability is maintained.
Is there talk in the market about who can replace Velarde?
What has been mentioned is what Julio Velarde himself once said, pointing out two of his main collaborators, implying that the eventual replacement could be people from inside the Central Bank. And there, of course, is the current general manager, Paul Castillo, who is a great technician, very qualified, with extensive experience in monetary issues. It would be a great guarantee. And he also pointed out Adrián Armas, who is the general manager of economic studies, who also has extensive experience within the Central Bank. I think that, in general, the expectation is that Julio Velarde will be ratified.
What factor led to the change in the expectation of compliance with the deficit fiscal rule?
The thing is that this year there have been exceptional income. But it is not the only rule that must be followed. There is also the spending rule, where we do see it more complicated, and the debt rule, which will still remain outside. The rule requires that it be below 30%; It is still a low debt, 32%-33%, but it is still misaligned. But more worrying is what may happen in the coming years.
The data
The Minister of Economy and Finance, Denisse Miralles, and her team must give signals about what they intend to do to contain the loss of resources by Petroperú, said the BBVA Research representative.
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