The International Monetary Fund (IMF) reiterated Peruvian economy will increase 3.7% in 2018 thanks to the implementation of a counter-cyclical fiscal policy.
In this sense, the
IMF recalled Peru's GDP grew at a slower rate in 2017 (
2.5%) because of Coastal El Niño phenomenon disasters and the Odebrecht-related corruption scandal, which counteracted the effects of a sharp rise in exports.
According to its
latest regional report, meteorological conditions also affected food prices, which triggered an upturn in inflation at the beginning of 2017.
Nevertheless, the weak growth and the appreciation of the Peruvian sol enabled the Inca country to end the year with an inflation rate of 1.4%, the lowest level since 2009.
Within this context, Central Reserve Bank (BCR) has cut the monetary policy rate six times since May and reduced the legal reserve.
Meanwhile, the Government has responded with a
counter-cyclical fiscal policy, thus increasing the 2017-19 deficit targets in order to finance reconstruction and restoration projects, with a subsequent consolidation to align the deficit with the fiscal rule.
"These measures are expected to help the economic growth rebound to
around 3.7% in 2018, but downside risks persist due to Odebrecht case investigations," the IMF noted.
Lastly, the Fund recalled Peru's GDP may grow 4% in 2019.
(END) JJN/JJN/JAA/RMB
Published: 5/12/2018