Peru's economy moving forward: How it reaches the Bicentennial

Photo: ANDINA/Archive

11:30 | Lima, Jul. 21.

Less than a month before the 200th anniversary of Peru's Independence Bicentennial (July 28), the nation's economic situation has been recovering in a remarkable manner —16 months after the COVID-19 pandemic arrived in the South American country.

Days ago, during the virtual forum "Peruvian economy: the pending agenda after the bicentennial," Economy-Finance Minister Waldo Mendoza stressed that the recovery from this tremendous crisis comes relatively quickly for the nation.

After a 30% drop in the second quarter of 2020, national GDP also registered declines generated by the pandemic in the third (-9%) and fourth (-1.7%) quarters.

However, the economy rose by 3.8% in the first quarter of 2021 over the same period of 2020, denoting a rapid recovery, which is even slightly higher by 0.1% compared to the level reached in the first three months of 2019 before the pandemic had hit the nation.

The 3.8% growth of GDP —during the first quarter of 2021— is one of the highest in Latin America, considering the results of Argentina (2.5%), Colombia (1.1%), Brazil (1%), and Chile (0.3%).

"We must also say that this Peruvian recovery is one of the fastest in Latin America," Mendoza expressed.

The outlooks for the nation are also encouraging since its growth projection stands at 10% for 2021, followed by an average of 4.5% during 2022-2024 —both indicators being much higher than those estimates for other countries in the region.

"We hope for the next few years Peru leading economic growth," the Cabinet member expressed.

Why is the country recovering much faster? The answer put forward by the high-ranking official is the extraordinary expansion of credit to private sector companies.

In fact, private business loans reached an expansion of 24.6% in August 2020, in the midst of the pandemic.

"In normal times, when the economy falls and goes into crisis, banks do not lend money; thus, the growth rate of bank credit falls. That has not happened in Peru because, far from being reduced, credit to companies has grown," he indicated.

During 2019 —a normal year— the growth rate of credit to the private sector was 6%. However, in 2020 —with the presence of COVID-19— that growth rate multiplied by four, reaching between 20% and 25 %.

This is explained because the Central Reserve Bank (BCR) and the Ministry of Economy-Finance (MEF) implemented the most powerful credit policy in Peruvian history, through the State-run programs Reactiva Peru, FAE-Mype, FAE-Turismo, and FAE-Agro.

"The companies did not stop receiving credit; that has kept them alive and prevented them from going bankrupt. Although, some companies in sectors, such as hotels and restaurants, obviously went bankrupt, the rest of the companies did not," said the minister.

The expansion of total credit to the private sector grew 9.7% in Peru during the fourth quarter of 2020, exceeding that registered in other Latin American countries.

"Peru implemented a credit policy supported by State guarantee, which —although it has a future cost— explains that notable growth in bank credit; it is the main variable why Peru is recovering faster than the rest of Latin America," Mendoza explained.

(END) CNA/JJN/MVB

Published: 7/21/2021

Peru's economy moving forward: How it reaches the Bicentennial

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