Development: Peru’s real annual GDP growth came in at 3.26% overall in 2015, the national statistics institute (INEI) reported on 15 February.
Significance: Growth in December was a strong 6.39% year on year, the highest in 23 months, lifting the full-year GDP result above even the government’s own estimated figure of 2.8% (and following a weak annual result of 2.4% in 2014). The country’s economic rebound to date remains very dependent on mining, however.
- While the 2015 figure will be spun as good news by the unpopular government led by President Ollanta Humala ahead of the April general election, the headline rebound remains driven almost exclusively by higher mining volume output, which is helping to compensate for the drop in global commodity prices. Thanks to new reserves coming on stream last year, including at the large Las Bambas mine (operated by MMG), mining output rose by 30.7% year in year in December (amid a 68% monthly spike in copper output), and by 9.3% overall in 2015. Peru is the world’s third largest copper producer and the metal accounts for 60% of total exports.
- Also performing well is fisheries – another key economic sector. It posted overall annual growth of 15.9% last year, thanks to a rise in fishmeal, of which Peru is the world’s main producer.
- By contrast, domestic demand still appears weak, with manufacturing registering an overall annual contraction of 1.67%, while construction too remains in the doldrums, falling by a sharp 5.9% last year.
Looking Ahead: With further additional mining output due to come on stream this year, the government is hoping for a stronger overall boost to growth and has pencilled in a real GDP forecast of 4%. While Peru has held up better than most of the South American commodity exporters, it is not immune to the problems afflicting the region. Inflation, for instance, has spiked up to a four-year high of 4.6% year-on-year on the back of the depreciation of the sol against the US dollar (now at a 13-year low of $3.52/US$), which voters will feel in their pockets ahead of the election. The central bank now says that inflation may only return to its 3% target ceiling by end-year/early 2017. Food prices may spike in coming months due to expected El Nino-related flooding, it has warned.
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