forecast that much of the problem in the Middle East would be resolved before the end of the first half. In that context, the monetary authority raised its global economic growth forecast.
During the presentation of the latest Inflation Report, Velarde said the situation in the Middle East could be resolved before midyear.
“The scenario we are still contemplating is benign, and much of the problem will be resolved before the end of the first half of the year," the BCR head indicated.
"This view is more or less shared by a large number of economic policy advisers, and everyone's baseline scenario is benign, probably because we have an economist’s perspective and believe people are rational," Velarde said.
"The prevailing idea now is that cool-headed people will take charge and seek agreements that can be reached. But so far, the baseline scenario is benign, which allows the growth we are projecting to remain relatively solid, even slightly higher than what was forecast in the December report," he added.
Global growth
The BCR governor said global economic growth forecasts were revised slightly upward, rising from 3% to 3.1% for this year and from 2.9% to 3% for 2027, supported by stronger performance in advanced economies, although global risk has increased due to the conflict in the Middle East.
"When Covid hit in 2020, despite having the Inflation Report ready, we did not present it because uncertainty was too high. We are not at that level, but many of the projections we are presenting now may not turn out to be accurate," he explained.
Oil less important
Velarde said that oil is currently less important to the global economy than it was in the past.
"So far, oil prices have risen by 50%, according to figures from Thursday, and they could go a bit higher. We will see how long it lasts," the BCR head stated.
"Now that oil is less important in global production, it could rise much further without affecting the global economy as much. But increases could be somewhat larger; that cannot be ruled out, although we still expect a benign scenario," he added.
(END) CNA/MVB