J.P. Morgan: Peru economy to grow 4.4% in 2018

Director global de investigación de mercados emergentes de J.P. Morgan, Luis Oganes. Foto: Andina.

Director global de investigación de mercados emergentes de J.P. Morgan, Luis Oganes. Foto: Andina.

10:50 | London (UK), Nov. 1.

Peruvian economy will get back on track and grow 4.4% in 2018 —above its 3.5% potential— driven by better commodity prices and investment in post-disaster reconstruction, J.P. Morgan projected on Wednesday.

During a presentation on Peru's economic outlook at Baker McKenzie headquarters in London, J.P. Morgan Emerging Markets Research Global Director Luis Oganes affirmed "the worst of the economic downturn is over" and the financial firm "expects a recovery."

"We estimate growth for this year at 2.6% due to the weak first half of the year. However, [we anticipate] much better figures for the second half of 2017, and we forecast 4.4% growth for next year," Oganes expressed.

"We are more optimistic," the officer added.

Such optimism, he explained, is "based partly on the external sector, due to the recovery in commodity prices and much greater mining production."

J.P. Morgan's estimates are thus in line with those of the Central Reserve Bank of Peru (BCR), which projects growth at 2.8% for 2017 and at 4.4% for 2018. 

Reconstruction with Changes

Oganes added economic growth would also be underpinned by the Government's efforts to reconstruct the infrastructure damaged and destroyed by Coastal El Niño floods in the first months of the year. 

As is known, the Kuczynski administration plans to invest more than S/26.6 billion (over US$8 billion) by 2021 in its Reconstruction with Changes program.

"Reconstruction efforts will become evident in terms of producing aggregate demand," he pointed out.

Private investment

In addition, the J.P. Morgan representative anticipated further capital inflow, which would help maintain a stable exchange rate and "relatively low" interest rates. 

While Peru's economic growth would be driven by a greater fiscal stimulus in 2018, Oganes explained the country would require greater private participation to maintain sustained growth as of 2019, since the private sphere makes up 80% of total investment.

In this sense, he anticipated a modest rise in national private investment in 2018 based on the business expectation indicators.

2018 Growth

Finally, Oganes ruled out inflation risks as a result of the country's 4.4% GDP growth projected for next year, which exceeds its 3.5% potential. 

In this respect, he recommended that Peru seek to increase its current GDP potential based on structural reforms focused on labor policy, education, FTAs and the debureaucratization of private investment. 


Published: 11/1/2017