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JPMorgan Expect Fiscal Deficit To Reach 1.2% of GDP This Year

PERU
  • Top Peruvian officials met on August 15 to coordinate efforts in response to the El Niño phenomenon, at a meeting headed by Prime Minister Alberto Otarola, according to official statements on social media.
  • In a note published recently, JPMorgan have reiterated the main idiosyncratic fiscal risk ahead is associated with a potential strong El Niño. They highlighted that congress approved a package of about 0.4% of GDP for preventive measures against an El Niño event. So far, the execution has been extremely low (about 4%), but that will likely change ahead. Note that the authorities recently expressed the intention to add another US$0.8bn, pending legislative approval.
  • In JPMorgan’s central scenario, below-potential activity, lower inflation, and the cautious spending behaviour due to El Niño will drive the primary fiscal deficit wider this year. They thus expect the primary deficit to reach 1.2% of GDP for the year, consistent with a 2.8% of GDP headline fiscal deficit.
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