Scotiabank: Peru's domestic demand projected to recover from 2Q 2023

Photo: ANDINA/ Archive

Photo: ANDINA/ Archive

11:00 | Lima, May. 24.

For the second quarter of this year, a reactivation of domestic demand is projected in Peru, which would grow at a rate even higher than that of GDP (above 2%), Scotiabank has announced.

This positive evolution is expected to be led by private consumption acceleration (as employment and income have continued to recover), as well as by public investment (the execution by sub-national governments has been better than expected despite their learning curve), Scotiabank's Economic Studies Chief Pablo Nano indicated.

The officer said that domestic demand decreased 1.4% during the first quarter of 2023, its first negative evolution in the last two years.

This evolution was basically due to the 12% contraction registered in private investment, in a context of deteriorating business confidence as a result of the social protests registered at the beginning of this year, Nano explained.

The latter, along with high inflation levels, also affected private consumption, which registered its lowest growth level since the beginning of the COVID-19 pandemic, he added.


Scotiabank also expects a lesser drop in non-mining private investment for the second quarter of 2023, as the lesser political noise registered since March has been having an effect on business confidence recovery.

Private investment (-12%) registered its major drop in the first quarter of 2023 since the second quarter of 2020, when most economic activities were temporarily paralyzed due to the start of the pandemic.

The banking institution added that private consumption (0.7%) registered a strong deceleration because, although the recovery of employment and income continued —namely in the formal sector—, this was limited by high inflation levels —which affect people's purchasing power— and higher interest rates —which have been influencing the slower growth rate of consumer loans.

Besides, there is no longer availability of extraordinary income (withdrawals from pension funds and CTS deposits), which had boosted consumption during 2021 and 2022.


Publicado: 24/5/2023