Peru's GDP falls 1.12% after 22 months of uninterrupted growth

Floods due to the passage of Cyclone Yaku in Chiclayo, Peru. Aldair Mejia (AP)

The most recent report from Peru's National Institute of Statistics and Informatics (INEI) has confirmed fears that existed after three months of nationwide protests against the government of Dina Boluarte.

The Gross Domestic Product (GDP) decreased by 1.12% in January, after sustained growth for 22 months.

Last week, at a mining convention in Canada, Julio Velarde, the president of the Central Reserve Bank (BCR), had already predicted that there would be a decrease of 1.4 despite the fact that the beginning of the year is characterized by being months of growth.

It was inevitable that the blockade of roads, the closure of markets, the clashes between law enforcement and protesters, and the impediment of the free movement of people and goods would have an immediate and significant impact on the Peruvian economy.

The most affected sectors are mining and hydrocarbons, construction, transport, finance and telecommunications.

Of all, the hardest hit has been construction, which has a negative variation of 11.7% as a result of lower cement consumption (-15.12%) due to the reduction of real estate and self-construction projects, as well as the cancellation of orders and suspension of the working day in some works.

According to the INEI report, mining and hydrocarbons follow on the list.

The sector that contributes approximately 10% of GDP fell by 3.61%.

The reason: low production volumes of tin (-62.5%), silver (-19.9%), molybdenum (-12.4%), zinc (-6.9%), gold (-6, 8%), lead (-6.7%) and copper (-1.6%).

Added to this is lower exploitation of crude oil (-16.7%) and natural gas liquids (-3.3%).

Regarding the Telecommunications and other information services sector, a decrease of 9.26% was registered.

The fall in the Financial and Insurance area has caused alarm: “It contracted by 5.95% as a result of lower credits (-5.6%) and deposits (-6.5%) of multiple banks.

There has been a downward trend in loans directed to corporations, large, medium, small and micro-enterprises (-11.4%), as well as mortgage loans for housing (-0.9%)”.

Regarding Transport, Storage and Messaging, there was a fall of 2.94%.

“Social conflicts had a negative impact on land transport (-3.1%) due to lower passenger and cargo traffic by rail (-40.9%), and the reduction in road transport (-3.0%) , due to the lower movement of cargo (-8.5%), ”says the document.

The horizon does not look encouraging either due to the floods that various regions of Peru have suffered.

The Institute of Economics and Business Development (IEDEP) of the Lima Chamber of Commerce has warned that in the event of a coastal El Niño Phenomenon in the coming months, five regions that contribute 16.7% of GDP would be affected.

These are Tumbes, Piura, Lambayeque, La Libertad and Ancash.

"Which would affect a reduction in the growth rate of our economy by up to 0.4 percentage points in 2023," they argue.

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