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Peru's economic growth will be sub-par in 2015

Thursday, March 12, 2015

Subject

Obstacles to a rapid return to high growth rates.

Significance

Peru's central bank took steps in the first quarter to boost the economy by relaxing reserve requirements -- growth having fallen below 2.4% in 2014, from 5.8% the previous year. Slowing domestic demand paralleled the declining dynamism of the external sector. The government predicts a recovery in 2015, but much will depend on whether proposed mining projects come on stream.

Impacts

  • Depressed growth rates will provide a negative backdrop to next year's presidential elections.
  • Foreign exchange reserves are still plentiful, and Peru can afford to see these fall in the short-to-medium term.
  • Investors may become increasingly wary of the 'good news' pitch projected by the Ministry of Economy and Finance.
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