Moody's: Peru Gov't measures to underpin domestic demand in 2020

11:07 | Lima, Nov. 8.

Moody's Investors Service Vice-President Jaime Reusche acknowledges that an increased minimum wage will favor —in the short-term— consumption among workers earning such remuneration, and that construction, financial, and real estate would be the most dynamic sectors this year.

The Moody's representative said the recently announced measures should make a marginal contribution to growth in 2020, above all, revitalizing the construction sector —while speeding up public investment projects with significant advances— and the real estate sector —due to readjustment of expenditure, which favors the increase in mortgage bonds.

The increased minimum wage will favor —in the short-term— consumption among workers earning such remuneration. The balance should be favorable to the activity in 2020 while underpinning a favorable momentum in domestic demand.

When asked about the measures needed to further promote public and private investments, Reusche said the National Infrastructure Plan is a good first step to improve articulation and linkages of public infrastructure works.

However, greater management capacity is needed. It will be essential to have highly-skilled professionals who can make decisions without being penalized over suspicions or anachronistic investigations that interrupt the inner workings of the public sector.

On the other hand, he noted that the sectors that will benefit the most would be the construction, financial and real estate ones, and —to a lesser degree— the retail sector, if consumption in sectors where minimum-wage employees work is invigorated within the margins, although the benefits would be much more limited.

On the foreign investment side, he went on to say that there is still a very calm atmosphere and investors have a favorable view of Peru, which has not faced incidents of social unrest, violence, and protests unlike other countries in the region.

"This calm is appreciated; it highlights the good opinion people have of Peru thanks to its solid economic foundations and fiscal solvency over the past years," he stated.


Published: 11/8/2019
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