Fiscal expansion boosts Peruvian economy

Centro Financiero.Foto: ANDINA/Carlos Lezama

Centro Financiero.Foto: ANDINA/Carlos Lezama

12:10 | Lima, Aug. 29.

Peruvian economy has entered a recovery phase characterized by the implementation of a countercyclical policy, the dissipation of adverse shocks and a favorable international context, the Economy and Finance Ministry pointed out.

Peru's economy will expand 2.8% in 2017 and 4% in 2018, Minister Fernando Zavala projected last week.

Approved by the Council of Ministers, the Multiannual Macroeconomic Framework (MMM) 2018-2021 contains the official projections with which the Public Sector Budget Bill is elaborated for the 2018 fiscal year.

According to MMM, the recovery path for national economy will comprise three phases:

First recovery phase will take place in the second half of 2017.

This section is mainly oriented to the reconstruction (rehabilitation and prevention works) and implementation of infrastructure for the 2019 Pan American Games.

In this sense, efforts will allow national economy to grow 3.2% in the second half of 2017. As is known, it expanded 2.3% in the first one.

Said fiscal expansion will boost economic activity and improve economic agents' expectations.

The second phase is scheduled for 2018.

This section is expected to accelerate public investment (17.5%), due to the reconstruction of areas devastated by Coastal El Niño (1.2% of GDP), and the construction works for the Pan American Games (0.3% of GDP).

Likewise, private investment is expected to grow 3.5% in 2018, after four years of contraction.

The third phase will arrive in 2019-2021

Lastly, this section will contribute to consolidating Peruvian economy's growth.

In order to underpin a potential growth above 4%, the current administration's competitiveness agenda will be crucial.
Said agenda prioritizes axes such as: Administrative Simplification, Bicentennial Infrastructure Plan, Strengthening of Labor Competitiveness, and Sectoral Development.  

As is known, last week credit rating agency Moody's Investors Service affirmed Peru's A3 rating while maintaining its stable outlook.


Published: 8/29/2017
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