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October 4, 2024
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Deficit will reach 3.4% of GDP, far from the fiscal rule

Deficit will reach 3.4% of GDP, far from the fiscal rule

While the Executive wants to disburse more than S/7,500 million for the purchase of war planes, Peru is preparing to fail to comply with the fiscal rule for the second consecutive year. According to BBVA Research, the fiscal deficit (the excess of expenses over government income) will close 2024 with a level of 3.4% of the Gross Domestic Product (GDP), above what the Executive promised to achieve this year. Even BBVA’s forecast is very similar to that of the Central Reserve Bank (BCR), which expects the deficit to end at 3.3% of GDP.

LOOK: FAO: Peru is the fourth largest fisheries producer in the world

According to Legislative Decree No. 1621 approved by the Executive within the framework of the delegation of powers granted by the Legislature, the Boluarte government committed that this year’s fiscal deficit should not be greater than 2.8% of GDP.

In this regard, the chief economist of BBVA Research, Hugo Perea, stated that if spending begins to relax and expenses are incurred that are not contemplated in the budget, the situation could become complicated, although he indicated that it is not the scenario that today is projected.

“Although a recovery in income is expected, we must also be careful with spending and know what things to prioritize,” he said.

Likewise, he recalled that as of August, the fiscal deficit accumulated in the last 12 months reached 4% of GDP, mainly due to the drop in income.

By 2025, BBVA Research estimates that the indicator will drop to 2.2%, in line with what the Executive projects, and thanks to the recovery of income.

Petroperu

The representative of BBVA Research explained that the rescue of Petroperú would not have a significant fiscal impact, although he pointed out that this new aid to the company “does imply a distraction of resources that could have been better used in citizen security, education, housing, health, programs social, among others.”

Likewise, he pointed out that there is concern because to date the board of directors that would be in charge of restructuring the State company has not been appointed.

On the other hand, Hugo Perea stated that they maintain their economic growth projection for 2024 and 2025 at 2.9% and 2.7%, respectively. He explained that private spending will gain more space in the coming months, but public spending will moderate.

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