will drive revenue growth in the coming quarters in Peru, Fitch Solutions has affirmed.
"We estimate that in 2018, Peru saw a 13.8% y-o-y
increase in government intakes as GDP growth, mining sector activity
, and tax collection all saw improvements," it expressed.
"These trends will continue in 2019 as our forecast of 3.9% economic growth remains in line with 2018's 4.0% print
, providing tailwinds to sales, income, and corporate tax receipts," it added.
According to Fitch, the Vizcarra administration will increase capital spending, limiting the pace of fiscal consolidation.
"We forecast government capital expenditures will grow by an average of 6.8% y-o-y in the next five years," Fitch Solutions said.
However, there is a broad commitment to fiscal consolidation in the years ahead.
The country's 'fiscal rule' sets a deficit reduction program that aims to narrow the deficit
to 1.0% of GDP by 2021.
"To that end, we expect current expenditure growth will lag behind revenue growth as the government institutes caps on public sector hiring and salary increases," it indicated.
Furthermore, Peru will maintain a manageable debt load. Its total public debt load is modest compared to several of its neighbors.
Over the longer-term, this will keep interest payments low, averaging 5.5% of total expenditures in the next five years. Should Peru need to tap international capital markets to finance its deficits, the country's commitment to business-friendly economic policies, investment-grade credit rating, and strong growth outlook would likely keep borrowing costs low.
Editor's note: Based on information provided by Fitch Solutions.