The Peruvian economy will recover in the coming years, driven by robust private consumption growth and a pickup in infrastructure investment.
After the budget balance flipped from a surplus to a deficit for the first time since 2009 in 2014, we expect persistent shortfalls in the coming years due to lower government revenue growth.
Weakening trade dynamics will drive depreciation in the Peruvian sol through 2016, with a modest appreciatory trend set to begin in 2017.
Major Forecast Changes:
Signs of further softening of Chinese metals demand saw us alter our exchange rate outlook for 2016, and we now anticipate a further weakening of the sol next year. We forecast the unit to average PEN3.210/USD in 2015 and PEN3.540/USD in 2016.
|f = BMI forecast; Source: BCRP, BMI|
|Real GDP growth, % y-o-y||5.8||2.4||2.8||3.8|
|Nominal GDP, USDbn||202.4||202.9||190.9||203.6|
|Consumer price inflation, % y-o-y, eop||2.9||3.2||3.6||3.2|
|Exchange rate PEN/USD, eop||2.80||2.98||3.32||3.30|
|Budget balance, % of GDP||0.5||-0.5||-3.2||-3.5|
|Current account balance, % of GDP||-4.2||-4.0||-4.7||-3.8|
Key Risks To Outlook:
A sharper slowdown in the Chinese economy than we are currently expecting, particularly as the recent stock market correction and yuan devaluation have exposed the underlying fragilities of the economy, would pose significant downside risks to our growth, FX and balance of payments forecasts for Peru.
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