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Standard & Poor's: Peru Gov't measures to boost public investment are positive

12:33 | Lima, Jan. 15.

The measures adopted by the Executive Branch in order to boost public investment are positive and the extension of the fiscal deficit goal to reach 1% of GDP by 2024 would not have an adverse impact on the credit rating of Peru (BBB+), Standard & Poor's (S&P) Analyst Livia Honsel said on Wednesday.

In an interview with El Peruano official gazette, she examined the factors that would promote faster economic expansion in the present year, as well as the macroeconomic strengths to cope with potential external shocks. 

When asked about economic growth prospects for this year, Honsel affirmed that Peru is projected to grow by around 3%, and that a gradual acceleration is expected in the following years.

According to the analyst, such a rate of growth would be one of the highest in the region. 

"We expect Colombia's expansion to reach 3% and Panama's to be around 4%. In the case of Mexico, a country of the same rating category as Peru (BBB+), the economic outlook is much weaker, about 1%," she stated.

A slowing down has been observed over the past years compared to periods of commodities boom. However, growth remains quite strong, although not enough to create the jobs the country needs.

In addition, she explained that Peru's economic growth projection is based on a mix of recovery in private investment —which was disappointing in 2019 due to the political context— and improvement in public investment.

Furthermore, Honsel referred to the Government's attempt to boost public investment in the Inca country.

"The capacity to implement the investment expenditure is complicated. After elections, it takes time for new authorities to learn how to execute investment, so the process is delayed," the Standard & Poor's expert expressed.

"Then, the Government's intention is positive. On the other hand, we need to track results over time to verify if these measures enable to reactivate public investment at regional and local levels, but this is positive," she added.

(END) MDV/RMB/MVB

Published: 1/15/2020
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