Andean Group - February 2009 (ISSN 1741-4466)

On 16 February Peru announced that real GDP rose 9.84% year-on-year in 2008. Within the region, this is matched by only Uruguay and Panama. Peru is slowing but will still outpace its Andean neighbours this year. The region's traditional fast-growing economies, such as Chile and Venezuela will struggle to get anywhere near trend growth this year. The result was the best since 1994 and caps 10 years of consistently strong economic growth. The economy is slowing down, however. In December 2008 output rose 4.9% over December 2007, slightly below the Reuters' forecast of 5.4%. The consensus forecast is that real GDP growth will slow to 5% year-on-year in 2009.

Strong domestic demand is the reason for the 2008 growth figure. Peru's growth was likely one of the highest in Latin America: only Uruguay and Panama, yet to report official figures, may post better results.  Annualised growth in Uruguay in the first three quarters of 2008 was a strong 11.8%, driven in large part by the new Botnia pulp mill, as well as the agriculture sector.

As in Panama (where overall growth is being driven by the project to widen the Canal), the construction industry had a particularly strong year in Peru, with 16.4% annual growth compared with 2007. Commerce, up 12.7%, also did well on the back of increased consumer spending, thanks to cheaper credit.

Manufacturing rose 8.5% annually, with secondary manufacturing (up 8.7%) doing rather better than the primary sector (up 7.5%). Mining and hydrocarbon production were also both up: mined-metal production rose 7.5%, with hydrocarbon production up 10.2%: natural gas production expanded 26.9% and zinc by 10.9%. Even the volatile agricultural and fishing industries had good years: agricultural output rose 6.7%, with fishing up 6.1%.

Inflation: In January inflation was 0.11%, down considerably on December 2008's 0.36%. This brings the rate for the past 12 months to 6.53%, much the same as the rate for calendar 2008 of 6.65%.