Moody's: Peru has fiscal space to boost public investment

(Andina)
Peru has fiscal space to implement the countercyclical measures aimed at boosting the economy in the short term, Moody's Investors Service Vice-President Jaime Reusche affirmed on Thursday.

In this sense, the officer indicated it is possible to use part of the fiscal space gained so far, although he warned against falling into fiscal overspending.

Last April, Peru's fiscal deficit reached 1.7% of GDP, whereas it stood at 1.5% of GDP in May.

"It could be easily expanded to 2% this year and then continue with the reduction. However, it (Peru) must do everything possible to reach 1% of GDP by 2021," he told El Peruano official gazette.

Evolution

"In recent months, there has been a fiscal revenue recovery that has reduced the deficit gap, but there is still work to do with the purpose of achieving the goals," Reusche expressed.


"Leaving behind the path towards the reduction of deficit to 1% of GDP would be a serious mistake that would destroy Peru's so important fiscal credibility, which anchors the favorable vision of foreign investors," he stressed.

Likewise, the Moody's representative pointed out public expenditure is inefficient and spending without clear objectives —of what is being purchased with those resources— could be dangerous and irresponsible.

Trade war

On the other hand, the senior analyst informed the trade war —between the United States and China— has still a small impact on the Inca country, but an escalation could highly affect its economic growth.

Furthermore, the officer stated mining investment is still stable, and the cash cost of exploiting minerals in Peru is one of the lowest in the world. Thus, even if metal prices drop, this will remain as a competitive sector.