Andina

IMF sees Peru's GDP growing 5.5 in 2014

13:37 | Lima, Jan. 29 (ANDINA).

The International Monetary Fund (IMF) said it expects Peru's gross domestic product to grow slightly below its potential at 5.5 percent this year.

Meanwhile, inflation in the Andean country is projected to decline to about 2.5 percent "as expectations are well-anchored owing to the strong inflation targeting framework."

"Peru’s economy continues to be a leader in high growth and low inflation in the region, which has been achieved through a prudent macroeconomic policy implementation, a far-reaching structural reform agenda and taking advantage of the benign external environment," the IMF said in a report.

In its Article IV consultation with Peru, the Washington-based lender said that the current account deficit is projected to remain elevated at 4.8 percent of GDP in 2014, but will decline gradually over the medium-term on account of expected pickup in mining exports.

It explained that the fiscal surplus is estimated to have fallen to 0.5 percent in 2013, from 2.2 percent in 2012, in part due to increased capital spending to support growth.

"The central bank has been unwinding reserve requirement, in particular on local currency, since mid-2013 and cut the policy rate by 0.25 percent of a point to 4 percent on November 2013 citing slower domestic and global growth."

The exchange rate policy has been more flexible, but the central bank has intervened to limit excessive volatility in the foreign exchange market, the IMF added.

According to the IMF's Executive Board, the overall state of the economy remains strong despite lower metal prices and recent market turbulence.

"Peru continues to be one of the most dynamic economies in the region, and one with the largest buffers thanks to past strong policy implementation."

With an economy growing somewhat near potential, macroeconomic policies should remain relatively neutral, unless additional turbulence in markets emerges or other downside risks materialize.

"Preserving policy flexibility by continuing with a good track record of appropriate policy responses to adverse circumstances remains instrumental to addressing future challenges."

Peru's real GDP is expected to have grown around 5 percent in 2013, underpinned by a recovery of exports and investment in the last quarter of the year as well as improvements in confidence as temporary supply shocks are being reversed.

Inflation, meanwhile, remained within the 1-3 percent target range, reaching 2.9 percent by end-2013 due to increases in food and fuel prices and some pass-through from the exchange rate depreciation.

(END) LVT/AQR/DLG/EEP


Published: 1/29/2014
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