The Business Confidence Index carried out by Vistage, showed an abrupt drop of 29 points in confidence on the part of entrepreneurs, compared to the fourth quarter of 2021 and 31, compared to the first quarter of the same year.
According to the company, this situation shows that the recovery of economic activity in Peru, the revaluation of the Peruvian sol, the lower internal impact of the pandemic, and the global rise in raw materials, during the first quarter, were not enough to maintain high expectations for the coming months.
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“This result of 84 points is the second worst indicator since the measurements began in Peru in 2017. Since the beginning of the pandemic we have not seen such a low Confidence Index, but Peruvian businessmen continue to work hard for the country”, pointed out Ignacio Mealla, director of Vistage Peru.
“In an uncertain and pessimistic context such as the one reflected in the numbers in this study, they continue to face this crisis, working to continue leading and driving their companies forward”, added.
Economic indicators
63.1% of the business leaders of Vistage Peru consider that, compared to 2021, the country’s economic conditions have significantly worsened. In this index, the worsening trend of the Peruvian economy grew 27 points compared to the previous quarter.
This is due to the sustained reduction in public investment during the first months of this year and a setback in mining activity; with a lower extraction of copper, zinc and silver, were part of the reasons that boosted the perceptions of Peruvian executives.
Another element to consider to understand this economic perception is the 2% inflation during this first quarter of 2022, according to data from the National Institute of Statistics and Informatics (INEI). The rise in prices in Metropolitan Lima, during last March, for example, was the highest monthly inflation in 26 years.
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Likewise, business expectations about the development of the Peruvian economy in the coming months are divided. 42.7% of Peruvian CEOs perceive that the economy will worsen, while 39% of them expect it to remain at current levels.
Although domestic political uncertainty plays an important role in the projections, business owners are also beginning to appreciate that the global economic recovery after the COVID-19 pandemic is now facing a scenario of high global inflation, rising freight prices and the consequences of the war between Ukraine and Russia.
Investment Indicators
Regarding the investment projections for the following quarters of 2022, 55% of interviewed entrepreneurs expect to keep their investment levels the same for the coming months.
This trend has held firm during the previous three quarters of 2021, when business leaders have also expressed that they do not yet feel ready to make the leap into big investments. Caution remains among private businessmen, despite advances in mass vaccination of Peruvians and a lesser impact of the pandemic.
On the other hand, 56% of business owners still have good expectations for the increase in the turnover of their companies, which shows how business expectations fell in the first quarter of this year, since 8 out of 10 leaders companies surveyed at the end of 2021, expected their turnover to increase in the following months.
growth indicators
In this last indicator, 42.7% of the Peruvian managers consulted expect the profitability of their companies to increase by 2022, while 31.1% expect it to decrease. Faced with this, it is highlighted that the CEOs and owners of large and medium-sized companies in the country have been concentrating on rethinking their internal schemes to achieve an expansion of their profitability.
Another relevant aspect that shows the few business expectations in the Peruvian economy is that more than half of private entrepreneurs. In other words, 52.4% do not expect to add new workers to their payroll, neither in the short nor in the medium term, with this response regarding employment being antagonistic to the previous quarter, since, at that time, 54% of the business leaders spoke of an increase in the number of their internal collaborators by 2022.
Finally, this indicator is affected or influenced by two factors: the recovery of employment that started this year, especially in Metropolitan Lima, but that still has 490,000 jobs to add to the market at the end of March (Peruvian Institute of Economy ). And second, the impact of Supreme Decree No. 001-2022-TR, which prohibits labor outsourcing and whose adaptation deadline expires on August 22, along with other initiatives in the Congress of the Republic to legislate on the remote work and jobs on digital platforms.
