Scotiabank: Economic growth would slow down due to social conflicts

Scotiabank: Economic growth would slow down due to social conflicts

In the first quarter of the year, the Peruvian economy grew 3.8%, but progress at that level is not expected for the second. On the contrary, everything points to a slowdown. According to estimates of the Gross Domestic Product (GDP) from April to June would only advance 2.5%.

The lower growth, explained the entity, would be due to a lower dynamism of mining “as a result of social conflicts that are affecting the activity of the sector”.

“Until the end of April, the production of the copper mine remained paralyzed, as well as the operations of the also of copper, which has been paralyzed since the middle of last month”, he commented.

He explained that the slowdown would also respond to the stagnation of investment.

“The greater political noise has been affecting expectations about the economy, which would generate a drop in the from the second quarter of 2022″he added, and indicated that for public disbursement there is a better expectation for this year.

Social conflicts

On the other hand, the Fiscal Council considered that the increase in conflicts is a “latent risk for economic growth in the short and medium term.”

In a document in which he analyzes the update of the macroeconomic projections presented in the Multiannual Macroeconomic Framework (2022-2025), he stated that “in the coming years there are downward risks since medium-term investment is based on mining projects that They have postponed their start and are currently in the pre-feasibility stage.”

To this is added that they are not taking advantage of the high prices of metals such as copper, as mining exports fell 0.7% in Marchdragged down by lower shipments of said metal (-10.3%) due to conflicts.

factors against

David Tuesta, president of the Private Competitiveness Council (CPP), pointed out that among the drawbacks to advancing economically is the political discourse that distances the private sector.

“The government’s economic projections are overestimated. There is no way to sustain the growth we had last year or in the first quarter”he added.

One of the consequences of this political discourse and social conflicts would be that in a few years the State will not have income to spend. “Today Peru has resources, but we don’t know (if it will) tomorrow. You have to be careful how you spend now,” he added. In this sense, he pointed out that “lean times” may come, when metal prices are not at the current level and Peru will not be prepared if it does not decide now to correct the errors that put the economy and investment at risk.

Keep in mind

-Scotiabank maintains its growth projection of 2.6% for this year.

-The agency Moody’s estimated that Peruvian companies will face moderate risks to have sufficient liquidity, due to “political turbulence, which weighs down the strong benefits provided by raw materials.”

-Peru’s situation is only better than Argentina’s, with moderate-high risk.

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