Velarde argues that since 2001, the economy has grown at its second fastest rate for 60 years. The average annual growth rate from 2001 to 2010 was 5.7%. The best decade in the past 60 years was 1961 to 1970 when the rate was 5.9%. Per capita, GDP growth in the past 10 years has been the best for 60 years at 4.4%. In the 1960s the rate was 2.9%.
The central bank is forecasting 7% GDP growth in 2011. In 2010 the economy grew 8.8%. In January 2011, the year-on-year rate of growth was 10%. Broad measures of domestic demand (such as electricity consumption up 10% in the first quarter, year-on-year and cement sales which were up 15%, year-on-year in January) point to string demand. It is worth noting, however, that the bank's consumer confidence indicator has been heading south since December 2010. On the other hand, residential property prices in swanky Lima areas, such as Miraflores and San Isidro, have been rising strongly both in Soles and in dollar terms.
The central bank has risen both interest rates (to 3.75%) and reserve requirements this year to cool down the economy, where domestic demand is strong. Velarde argued that the effective base interest rate is now 4.75%, which means that monetary policy is no longer expansionary.
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