Peru's private consumption will likely accelerate to 3.6% in 2018-19 as the economy recovers, slightly faster than its 3.3% average compound annual growth rate from 2014-18, Moody's Investors Services projected in its latest report.
"Although a resurgence of political uncertainty could hamper consumption temporarily, the consumer sector is fairly resilient in Peru, given its high level of informal employment, which tends to be countercyclical," Moody's expressed.
According to the credit rating agency, roughly 70% of the Peruvian labor force is in the informal market, where it is common practice for local employers to pay daily wages.
The credit quality of packaged-foods and beverage companies depends in part on their ability to adapt to changes in consumer preferences and the
new excise tax on less-healthy products.
"Consumers in Peru —like consumers everywhere— are becoming more aware of health and obesity, compelling food and beverage companies to offer a broader array of healthier products," it stressed.
Most have launched such products, which helps offset long-term effects of the new excise tax, but the sudden, large change in consumer preferences from the tax will still be disruptive in the short run.
The new excise taxes will have mixed effects on consumption. While taxes on tobacco and alcohol will discourage demand, taxes on fuel will likely be passed through to consumers.
"For the sugary beverages, volumes will drop at first but should recover as companies change their product portfolios to accommodate consumers' gradual shift toward water or other healthy categories," Moody's concluded.