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Illustrative file photo of the IMF logo
March 7 (Archyde.com) – The outlook for Peru’s economy is “highly uncertain and downside risks prevail” despite a strong rebound in its gross domestic product (GDP) last year, the International Monetary Fund (IMF) said. ) in a report released Monday.
The IMF said that following posting 13.3% GDP growth last year, Peru’s economy is expected to expand 3% in 2022 as external conditions tighten and policy stimulus is withdrawn in the mining country.
The main risks relate to the pandemic, a sharp tightening of global financial conditions, extended global supply chain disruptions, geopolitical tensions and a sharp slowdown in the economy of China, its largest trading partner, according to the report.
“The economic recovery has been solid, but the outlook faces internal and external downside risks,” the IMF said, adding that Peru is still bearing high social and economic costs related to the pandemic.
Regarding the Peruvian central bank’s efforts to curb inflation, the IMF said that monetary policy has responded well to inflationary pressures “but further tightening is needed” to control rising prices.
Peru, the world’s second largest producer of copper, posted inflation of 6.43% in 2021, the highest rate in 13 years driven by imported food and energy prices and the depreciation of its currency once morest the dollar.
At the beginning of February, the Peruvian central bank raised its reference interest rate for the seventh consecutive month, to 3.5%.
“Although inflationary pressures are less acute than elsewhere in the region, the monetary stance (in Peru) remains slightly dovish and further tightening is warranted to stabilize expectations,” the IMF said.
Highlighting Peru’s rebound from its worst recession in decades, the IMF said continued political uncertainty in the government of leftist President Pedro Castillo might still have “adverse effects” on private investment.
(Reporting by Carolina Pulice, edited by Marco Aquino)