The Central Reserve Bank (BCR) projected a growth of around 3.5% of the Gross Domestic Product (GDP) for the second quarter of the year, in a recovery scenario, especially in the sectors linked to meeting the growth of consumption private, said Adrián Armas, central manager of Economic Studies of the entity, in the presentation of the Monetary Program to June.
“The data to the first quarter of 2022 show a increase 3.8%, mainly due to the increase in non-primary GDP (manufacture, services, trade), which grows 5%; that is to say, it has been observed that on the side of internal demand there is a significant increase in private consumption”I note.
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Likewise, he pointed out that the advanced indicators at the end of May show that the recovery of private consumption is maintained, which grew 2.5% last month. In addition, the sectors with the highest increase were those linked to services most strongly affected by the pandemic, such as accommodation and restaurants, with 49.4%, and transportation and storage, with 12.4%, for the first quarter of the year.
Juan Carlos Odar, director of Phase Consultores, pointed out that, if the data of the increase of the BCR economy is valid, we would be talking regarding a way out of the slowdown trajectory that is taking place between April and May.
“April’s rate is probably positive and that prevents it from continuing on the downward path in seasonally adjusted terms. With that figure, the BCR is signaling that there is a strong rebound between May and June”he explained.
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Likewise, he pointed out that the economic activity is currently having several slowdown factors, which come from the international sphere, to which are added local issues such as the lower mining production that is just recovering.
“We have had the sum of several factors that have weakened the economy, such as the rise in inflation that has led the BCR to be very active in raising the reference interest rate”
In this sense, it should be noted that the central bank raised this Thursday, for the eleventh consecutive month, the reference interest rate by 50 basis points due to the increase in inflationary expectations, placing it at 5.50%.
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Inflation
The issuing entity projects that inflation would return to the target range (between 1% and 3%) between the second and third quarters of next year and that the downward trajectory would begin next July “due to the beginning of the reversal of the effect of various factors on the inflation rate and its expectations (such as the exchange rate, rise in international prices of fuels and grains) since the economic activity will still be below its potential level”, said Armas.
In this sense, Odar affirmed that the inflation expectations for the end of the year rise to 6.3% and that he sees a scenario in which the BCR can once once more raise the reference rate, but this will be conditioned by the dynamics of the rebound. of inflation.
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“It is foreseeable that there will be additional pressures on the food side to those we have already had due to the issue of fertilizers, whose effect might be noticed in the first half of next year. For now we can say that the BCR is close to the ceiling and might add 50 basis points more and close the year at 6%, but in 2023 there might be additional pressures that make it continue to raise its rate “explained the economist.
VAT exemption
Asked regarding the impact that the VAT exemption has had on some products of the basic basket, Armas explained that a greater impact has been observed on the formal sector. Likewise, he noted that the measure has not been reflected in a price reduction because production costs continue to rise. However, he has allowed that consumer prices have not continued to increase, as would have happened if the measure had not been applied.
Odar agrees that the measure has contained the rise in prices and added that it is important to understand that, if the inflation rate subsides from now on, this does not mean that prices are being corrected; that is, they have already risen and are expected to continue to rise at a slower pace.
stagflation
Recently, the World Bank (WB) revised downwards the forecasts for increase worldwide and thereby warned regarding risk factors for stagflation globally.
Regarding this, Armas pointed out that the risk of a stagflation (stagnation of the economy with high inflation) is greater in countries with an overheated economy, which is not the case in Peru.
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“In Peru we estimate that the GDP gap is still below its potential level, unlike other countries”
On the other hand, Odar considered that, if the increase in the second quarter it is less than 2.7%, outside the BCR scenario, we would be talking regarding entering a recession.
“There is less than one point of difference with respect to the projection of the monetary entity and, considering that April has been punished, we would be talking regarding a scenario close to a technical recession. The BCR is more optimistic than we thought”I note.
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Exchange rate
According to the BCR, as of June 8, the exchange rate was S/ 3,767, depreciating the dollar by 5.6%, compared to December 31, 2021 (S/ 3,991).
“Exchange rate surveys have moderated following last year’s nervousness over the exchange rate pace. This year the sun has tended to appreciate and that reflects the good levels of the price of minerals, which generates foreign currency entering the country, with which our economy has been favored “Weapons noted.