The private investment in Peru by 2022 might be clouded by the political uncertainty and social conflict that plague the Andean country, warned Monday the International Monetary Fund (FMI) it’s a statement.
The international financial organization said that the economic outlook for Peru “is surrounded by great uncertainty and the risks are tilted to the downside”, so the country’s economic growth is expected to slow down to 3% this year, the same percentage that predicted on March 8.
“Further outbreaks of covid might lead to reinstatement of containment measures, while political uncertainty and social upheaval might cloud private investment,” warned the agency in the note.
In this sense, he insisted that there might be “positive surprises” if there is “a moderation of political uncertainty”, raised by the escalation of tension between Congress and the government of President Pedro Castillowho, in nine months of management, accumulates four different cabinets and overcame two failed attempts by the parliamentary opposition to remove him.
However, the IMF highlighted “the great strength of Peru’s policy frameworks and macroeconomic buffers”, which is complemented “by an agreement within the framework of the flexible credit line that comes to an end on May 27” .
All this will contribute “to protect the economy from downside risks”, always according to the FMI.
“The strength of the external and fiscal accounts, the adequacy of the coverage of reserves, access to international capital markets, the low level of public debt and the resilience of the financial sector offer Peru wide margins of protection once morest to adverse ‘shocks'”, added the fund.
The FMI He added that inflationary pressures, which reached the highest levels of the last quarter century, might prove “more persistent” still and require “a more rapid tightening of monetary policy.”
Externally, the agency highlighted the risks arising from current geopolitical tensions, the tightening of global financial conditions, the persistence of disruptions in international supply chains and the “abrupt” slowdown in growth in China, the main partner commercial of Peru.
“STRONG” RESPONSE TO THE PANDEMIC
On the other hand, the FMI congratulated the Peruvian authorities for their “strong macroeconomic response policy” with the application of policies that helped mitigate the impact of the pandemic and “support a vigorous economic recovery.”
Along these lines, he stressed that Peruvian economic activity “recovered strongly” from the slowdown suffered in 2020, when it shrunk by 11.12%, a result with which the country interrupted 22 consecutive years of growth and recorded the worst fall in the last three decades.
“The forceful response policies deployed in 2020 contributed to mitigating the impact of the pandemic and laid the conditions for a rapid recovery,” said the organization, which recalled that our country closed 2021 with an advance of 13.3% of its gross domestic product (Start).
He pointed out that this growth, which exceeded the pre-pandemic level but remained below the trend it had been registering, was supported by “vigorous external demand, favorable terms of trade and repressed internal demand.”
However, he recalled that participation in the labor force and total employment have not yet fully recovered and that poverty skyrocketed in 2020, when it reached 30% of the country’s population.
On fiscal policy, directors agreed that it should “remain neutral in the short term,” but advanced that “gradual consolidation, encompassing revenue mobilization and spending rationalization, including pension reform, will be needed.”
They also indicated that “it is important to correct the deficiencies in the regulatory and supervisory framework” of the financial system, as well as address informality, “especially in women”, which in general terms covers 75% of the economically active population ( PEA) of the country.
Finally, the IMF affirmed that the renewed agenda of structural reforms in the context of Peru’s accession process to the Organization for Economic Cooperation and Development (OECD) “will be essential to mitigate the consequences of the pandemic and support a green recovery and inclusive”.
(EFE)
