Pozo had been predicting GDP growth of 3% to 3.5%. He has also lowered his growth forecast for next year to 4% — as against the 6% agreed with the IMF.
Public finances are going to get tighter. Pozo sees the primary fiscal surplus reaching 4% rather than the expected 5% this year, and shrinking to 3.6% next year. Half of his US$7.1bn draft budget for next year will go on debt servicing (US$2.4bn) and the government payroll — and the latter is based on the hope that congress will approve labour reform legislation which will allow the government to freeze public-sector salaries next year. Congress has been resisting pressure from the executive to give this bill urgent treatment, with only cursory debate.
A survey of businessmen conducted by Seminarium shows a majority unconvinced that economic recovery will take place next year; they predict 2005 at the earliest. A majority also perceive the current economic situation as worse than a year ago. A strong influence on their mood is the contraction of domestic consumption, signalled by the 4.4% fall in imports of consumer durables in the first half of the year.
PERU | Mining sector keeps the economy growing. Economic activity in Peru in the first seven months of the year was up 4.3% on the same period of 2002. The driving force was the extractive sector (chiefly mining, since the oil industry performed poorly) which was up 8.3% — more than offsetting the decline in another big export sector, fishing (down 18.9%, due to the ban on anchovy). The July figures show both trends continuing: the extractive sector up 11.9%, fishing down 26.2%.
One thing economic growth is not providing is jobs: the open unemployment rate in Lima in June-August was up to 9.3%, as against 8.7% a year earlier.
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