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Moody's: Peruvian economic growth, rising consumer demand and investment are improving

00:20 | New York (U.S.), Oct. 31

Peru's dynamic and investment-led economy has proven resilient to a series of internal and external shocks, Moody's Investors Service has affirmed.

"We expect the economy to recover strongly this year, with growth rising to almost 4% from 2.5% in 2017, as it shifts from external-led growth to a more sustainable domestic-demand growth cycle," Moody's expressed.

Therefore, this will again make it one of the fastest growing economies in the region.

Furthermore, high frequency and confidence indicators have recently posted stronger-than-expected results. Meanwhile, public and private sector investment is once again driving overall activity, which will boost living standards.

The economy will likely maintain its 4% growth rate through 2021 because of favorable private investment dynamics in various sectors, including mining, infrastructure, telecom, real estate, and energy, and a recovery in consumer demand.

Likewise, several large investment projects in mining, infrastructure, telecom, real estate and energy will boost overall activity and accelerate formal job creation, helping boost corporate and consumer lending.

A growing economy will underpin loan growth

While rapid credit growth over the past decade pushed Peru's credit-to-GDP ratio to almost 40% in the first quarter 2018 from 25% ten years earlier, loan growth has slowed to just 3.9% in 2016 and 4.2% in 2017 due to the Car Wash corruption scandal, Coastal El Niño-related flooding, and political volatility.

"However, we expect growth to rise to 11% in 2018 and nearly 12% in 2019," it stressed.

The recovery will be driven mostly by consumer, mortgage and corporate lending, while lending to small and medium-sized enterprises will remain subdued.

Additionally, corporate loans growth will be focused in the agriculture, mining, commerce and trade sectors. At the same time, consumer lending will rise in line with increasing consumer demand, greater banking penetration, and middle-class growth, while relatively low-interest rates and declining real estate prices will boost mortgage lending.

(END) NDP/DTK/MVB

Published: 10/31/2018

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Moody's: Peruvian economic growth, rising consumer demand and investment are improving

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