IMF cuts back Peru's economic growth projection and forecasts 2.5% for 2019

The International Monetary Fund (IMF) again lowered Peru's economic growth forecasts to 2.5% this year, compared to an estimated 2.6% in October. While by 2020, it reduced its estimate to 3.25% from the previous 3.6%.

In the "Article IV" report that resulted from an official visit to the country and was published on Tuesday, the IMF maintains that although Peru remains one of the best performing economies in the region, economic activity has lost momentum in recent years and its growth will remain "modest" before taking more momentum.

The agency emphasizes that the measures adopted by the government to accelerate the execution at all levels should contribute to the recovery of public investment and, consequently, reduce the fall of extractive activity and social conflicts in the mining sector.

However, it projects a 2.5% GDP growth in 2019 and warns that although the negative GDP gap is expected to persist, inflationary pressures should remain moderate. By 2020, he predicts that the gradual strengthening of demand from trading partners and resilient private consumption and investment would increase GDP to 3.2%.

The IMF values ​​in its report the downward trend in risks and believes that the room for maneuver to implement countercyclical policies is sufficient to mitigate the impact of any adverse shock, caused by uncertainty and global trade tensions, as well as for greater political noise and effects on business investment due to corruption investigations.

Given this scenario, the Fund considers it necessary for Peru to have broad-spectrum policies that deepen the resilience to shocks, increase productivity and improve social protection.

«The current slowdown in activity and the exacerbation of uncertainty would justify a fiscal and monetary stimulus. A stronger financial infrastructure would underpin the system's ability to absorb a wider range of external shocks. Structural reforms would strengthen competitiveness and productivity, and make growth more inclusive, ”says the report.