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Peru’s economy 41.9% in the second quarter, overcame the recession but faces great challenges

Peru’s economy formally emerged from recession, after a record growth of 41.9% in the second quarter, but faces great challenges due to political turmoil and the aftermath of the pandemic, experts warn.

“There is a lot of uncertainty, which makes it difficult to make projections in terms of economic growth or job recovery, “sums up independent economist Jorge González Izquierdo for AFP, alluding to the struggles between the leftist government of Pedro Castillo, which took office almost a month ago, and the right-wing opposition, which controls Congress.

These disputes have already cost Foreign Minister Héctor Béjar his job and New cabinet changes are rumored to be coming.

With the tensions of the electoral campaign and the fears of Castillo’s policies, the exchange rate rose to the record of 4.1 soles, from 3.62 soles in December.

The Lima Stock Exchange has also felt the uncertainty and fears of a sharp turn to socialism after three decades of a liberal model: accumulates losses of 22.1% this year, although it had a “rebound” of 4.37% this Monday due to rumors that other ministers questioned by the opposition would come out.

The new government will face a great test in Congress this Thursday, the day on which the entire cabinet must appear before the plenary session, looking for a vote of confidence, essential to continue their work, according to the Constitution.

If Parliament refuses him, Castillo will have to appoint another prime minister, replacing the leftist engineer Guido Bellido, and reorganizing the 19-member cabinet.

In this case the new cabinet should appear before Congress within a month in search of a vote of confidence, which would further prolong the uncertainty.

Growth

With 41.9% GDP growth in the second quarter, Peru’s economy accumulated two consecutive positive quarters in 2021. In the first quarter of the year it expanded 3.8%.

But this expansion the second quarter It compares with the same period of 2020, when the activity was practically paralyzed due to mobility restrictions due to covid-19.

“It is a rebound effect, you have to look at other indicators: how we are growing in relation to 2019 and with seasonally adjusted figures, “indicates González Izquierdo, a former labor minister.

“In the first half of this year, compared to the first half of 2020, the Peruvian economy grew -0.1% [es decir], did not grow. And in seasonally adjusted terms, in the same period growth was zero, “he explains.

Furthermore, “the process of job recovery is even weaker […] and in terms of per capita income we are still quite far from the level that was had in 2019“Before the pandemic, he adds. In 2020 per capita income in Peru fell 13%, according to the World Bank.

“Based on these three indicators [crecimiento respecto a 2019, empleo e ingreso per cápita], I say that the recovery process of the Peruvian economy is weakHe is weak, “says González Izquierdo.

The doubts

This stark diagnosis is shared by other economists.

“It’s great that GDP is picking up. But how do people benefit from that recovery when employment and salary figures they are not greedy? In these two indicators we are not close to the pre-pandemic levels, “the economist and academic Hugo Ñopo warns AFP.

“Today people work in more precarious jobs and (receive) lower wages. You run the risk of taking pride in a macroeconomic success that does not translate into well-being in homes“, he says, specifying that” productive investments are slowed down. “

“A limitation of this investment is the struggle between Legislative and Executive, but also the lack of technical solidity of the Executive. That is a weakness of the government and investors notice that at a time when the president has chosen to put political figures in production positions. And that doesn’t seem like a good idea, “says Ñopo.

“We have come out of the recession, because we’ve bounced off an atrocious situation previous, which is the fall of 2020. Tougher times are coming for several reasons: private investment is totally stopped, there is no new investment, “warned economist and academic Guido Pennano in dialogue with AFP.

In addition, “international food prices are going to rise due to the drought in Canada, that affects Peru because it is our main supplier, “he adds.

“Added to this is the uncertainty of how the government will handle the probable third wave of the pandemic, because they are already talking about measures to control productive activities, “concludes Pennano, a former Minister of Industry.

With Francisco Jara. AFP Agency

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