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LatinNews Daily - 01 March 2021

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In brief: Large fiscal deficit in Peru

*Peru’s economy & finance minister, Waldo Mendoza, has reported that the country’s fiscal deficit reached 8.9% of GDP in 2020. The sizable deficit result has been attributed to the economic crisis produced by the coronavirus (Covid-19) pandemic which led to a fall in domestic economic activity last year (-11.2% GDP growth) and a substantial increase in emergency government spending to try to offset this. Mendoza noted that this is the worst fiscal result registered by the Peruvian government since the 1980s, highlighting that public debt rose from 26.8% of GDP in 2019 to 35% of GDP last year as the government resorted to borrowing to finance its emergency spending. The minister said that he expects that Peru’s economy will recover this year and post growth of 10%, which should help to bring the fiscal deficit down to around 4.8%. However, Mendoza noted that the public debt is set to continue to rise, reaching 36.4% this year and a peak of 37% between 2022 and 2023.