Peru’s Central Bank President Julio Velarde said the country’s GDP will shrink this year, the first time a government official has publicly acknowledged the degree of economic contraction.
The central bank confirmed that GDP will contract by 0.5% in 2023, compared to the September forecast of 0.9%, an almost unattainable forecast given that the economy has now contracted for six consecutive months.
Velardi lowered his inflation estimate for 2023 to 3.1% from 3.8% due to easing food prices.
Next year, the economy will expand by 3% while consumer price growth will fall to 2.3%, according to forecasts presented on Friday.
Peru’s economy is experiencing its worst recession in years, overlaps with a period of high inflation that finally seems to be under control and policymakers have cut the key interest rate for four consecutive meetings, and analysts see more cuts on the horizon.
The bank cited adverse climatic conditions for agriculture caused by the El Nino phenomenon, months of social conflict and weak private investment as the main contributors to the decline in GDP this year.
“The main ones are climatic factors,”Velardi said. “They have hit our most dynamic sectors over the past few years, which are exports,” he said.
The bank expects private consumption to rise by 0.2% this year, while private investment will fall by 7.3%.
