🛑 Private investment in Peru would grow only 2.7% this year and no longer than 19.1%, due to political noise 🛑

  BUSINESS   Private investment in Peru would grow only 2.7% this year and no longer than 19.1%, due to political noise

This projection corresponds to a radical scenario of measures that President Castillo would carry out. With this, the economy would grow 7.4% and in 2022 it could fall.

After the speech of July 28 by President Pedro Castillo, the appointment of Guido Bellido as president of the Council of Ministers and the swearing in of the ministers of the first Cabinet of the current Government (with the swearing in 24 hours after Pedro Francke as Minister of Economy) , economic analysts agree that a scenario of high uncertainty for the country's economy has already been set.

There is a growing concern of being under a more extreme (or radical) scenario of measures that the current Government would take.

In this context, Elmer Cuba, economist and partner of Macroconsult, argues that the greatest impact will occur in 2022, when GDP would stagnate or could fall, but it will also slow down the growth projected for this year, especially on the side of the private investment.

Thus, Macroconsult projected that, under an inertial scenario, that is, if the economy continued to behave as it did in the first semester, private investment would grow 19.1%. And with a Castillo government that applied moderate measures, the growth of private investment was estimated at 7.1%.

However, under a more radical scenario like the one we would have already entered with the Bellido Cabinet, private investment would grow only 2.7% (see table). Consequently, GDP growth would also be lower, at only 7.4% instead of 11% in the inertial scenario.

-Year 2022-

Cuba warns that the biggest problem is for 2022, since if this radical policy is specified, private investment would fall even more and, with it, GDP.

He warns that projecting figures at this time is complicated, since the scenarios have been opened and anything can happen in the political field, but instead of growing 4% as projected in an inertial scenario, GDP could be 0% or even fall.

Fortunately, the fall would be cushioned by the rebound in sectors that have been recovering with the advance of vaccination and by good international conditions.

-Actions-

Political uncertainty affects other investments as well.

An analysis of the main Peruvian equities (MSCI Peru Equity ETF) prepared by Alpha Sieve indicates that, while still attractive due to the good growth prospects, “you would have to be a consummate lion's heart to dive into Peruvian equities in this juncture ”.