Moody's: Peru's per capita income tripled so far this millennium


Moody's rebaja nota crediticia de Francia, como consecuencia de la crisis.

17:31 | Lima, Nov. 10.

Peruvian economy has seen great progress in recent years, and this can be witnessed in Peruvians' income which has tripled so far this millennium, Moody's Sovereign Risk Group Vice-President Jaime Reusche pointed out.

"Today, Peruvian economy's characteristics —compared to a few years ago— have become completely unrecognizable," Reusche expressed. 

"We have left annual incomes of US$2,000 behind in 2000; instead, per capita income has increased threefold," he added.

The officer underscored that —since recession back in the 1980's— the Andean nation has not experienced any other downturn of such magnitude. 

In this sense, the last Peruvian GDP contraction was registered in 1998, when the country was hit by El Niño climate phenomenon.

"Since then, the [Peruvian] economy seems like a success story, as it started changing in the 90's with the implementation of reforms that —until now— generate tangible benefits," he expressed. 

Likewise, Reusche affirmed the Andean country had gone through a favorable economic cycle, which led to average growth rates of 6.5%. 

Nevertheless, Peruvian economy was exposed to shocks that affected its expansion between 2014 and 2016, even until the present year.

According to Reusche, GDP has decreased three percentage points in recent years.

However, he explained this phenomenon is not only happening in Peru but also in other nations of the region, such as Chile and Colombia.

The officer pointed out this slower growth pace is due to the fact that Peru has already reached the middle-income trap, in which it becomes more and more difficult to continue expanding.

Middle-income trap

The middle-income trap is a theorized economic development situation, where a country —which attains a certain income— will get stuck at that level. 

A developing nation gets "trapped" when it reaches a certain, relatively comfortable level of income but cannot seem to take that next big jump into an income nation. 

Credit rating

Moreover, the officer underscored Moody's Investors Service has maintained the Inca nation's credit rating on A3 investment grade with a stable outlook.

"Peru has the best [credit] rating in the region, only surpassed by Chile," he added. 

Finally, he underlined Peruvian economy's potential, as well as its solid macroeconomic fundamentals, fiscal space and —especially— its fiscal credibility.

Published: 11/10/2017