Peru's economy is recovering strongly in 2018, shifting away from external-led growth to a more sustainable domestic-demand growth cycle, Moody's Investors Service affirmed in its latest report.
High frequency and confidence indicators are posting stronger-than-expected results in recent months. Investment
— is once again driving overall activity.
"We believe that this is partly due to base effects given
that the brunt of the shocks were
felt in the first half of last year, but even if the economy cools in the second half of this year, the overall expansion for 2018 should be in line with potential at 4%
," Moody's expressed.
The mining investment cycle that came to a close in 2015 led to a significant increase in mineral output
that pushed headline growth to 4% in 2016, but domestic demand was expanding by an anemic 1.1%.
This highlights the strong relationship between investment, formal employment
, and consumption that has dominated in the Peruvian economy since the early 2000s and the importance of private investment
as a key support of sustainable medium-term growth in the country.
"The economy is likely to maintain its current 4% rate of growth
through 2019 given favorable private investment dynamics," Moody's forecasted
Anchoring these trends are a variety of large investment projects in various sectors including mining
, telecom, real estate, and energy.