Peru’s government has revised its economic growth forecasts downward for this year and the next, citing challenges in the country’s copper industry, the El Niño weather phenomenon, and social unrest.
The Ministry of Economy and Finance (MEF) announced in Peru’s official gazette, El Peruano, that the economy is now expected to grow by 1.1% in 2023. This is a significant reduction from the previous estimate of 2.5%, reflecting a contraction in the economy during the first half of the year. This would mark Peru’s slowest annual growth rate since 2009, excluding 2020, when the global business landscape was disrupted by the Covid-19 pandemic.
Looking ahead to the period between 2024 and 2027, the MEF anticipates economic growth of over 3%, although this figure is also lower than the previous estimate of 3.4%. The ministry expects the second half of this year to see economic recovery driven by improvements in domestic demand, particularly private spending, resolution of social conflicts, and increased investment in infrastructure.
Private investment in the mining and metals sector, a key area for Peru, is projected to decrease by 4.5%, despite an anticipated 7% growth in production by the end of 2023. The MEF notes that new investments in mining projects will reach nearly $7 billion (25.8 billion sol) over the next four years.
Peru is the world’s second-largest copper producer, trailing behind Chile. Copper prices have declined from an average of $400 per pound (/lb) in 2022 to around $380/lb this year, with further decreases expected next year, according to Reuters.
Finance Minister Alex Contreras stated in a press conference that the government is actively working to reverse the downward economic trend. He also mentioned that inflation is slowing, with the annual rate expected to drop to 4% by year-end.
Additionally, the El Niño climate event is forecasted to impact Peru’s fishing industry due to warmer waters affecting marine ecosystems. This has resulted in a decline in the production of anchovy-based fertilizer fishmeal, a sector where Peru holds a global leadership position.
The government has also expressed concerns about increased rainfall associated with warmer weather, which could threaten infrastructure and potentially harm the agriculture industry across the country.
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