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Scotiabank Believe Closer Look At GDP Breakdown Reveals Some Cracks

PERU
  • According to Scotiabank, what was reassuring about last week’s Peru GDP data was that all components showed positive growth, including private investment (albeit, barely, 0.3%). Furthermore, although exports fared well, the fact that domestic demand growth, up 2.1%, also outpaced GDP was encouraging.
  • However, a closer look reveals some cracks that still need to be mended, especially in the private sector. It was clearly public sector spending that led growth in Q1-24. Of course, it is not bad that public investment increased nearly 40% YoY in Q1. The concern is that this is not triggering, at least not yet, a consequential increase in private investment. Scotiabank believe that Peru’s post-recession recovery will only gather strength once non-mining investment begins to perform.
  • Looking at growth overall, the glass does look rather more than half full going forward. Reasons for optimism include the upsurge in metal prices that has been taking place, the increase in household resources from pension fund and worker compensation withdrawals in Q2 and Q3, the restoring impact of lower inflation on real wages, declining interest rates, and the energy the government has been putting into accelerating infrastructure projects and permits for mining.
  • With all these tailwinds, Scotiabank remain comfortable with their forecast of 2.7% GDP growth in 2024, and even see some upside to it, subject to developments in the political sphere.
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