Peru: Growth jumps in Q3 on sturdier domestic demand
Economic growth accelerated to 3.0% year-on-year (yoy) in the third quarter (Q2: +1.2% yoy), marking the fastest expansion so far this year. According to data released by the Central Bank on 21 November, stronger domestic demand drove the turnaround.
Faster increases in private and public consumption, as well as in private investment, was behind the jump in domestic activity in the third quarter, which expanded 4.1% from Q2’s 1.9%. Notably, fixed investment growth sped up to 5.7% year-on-year (Q2: +5.5% yoy), thanks to stronger private investment, especially in the mining sector and in real estate, while public investment was flat as falling investment from regional governments offset higher investment from the national government. Furthermore, household spending gained traction (Q3: +3.3% yoy; Q2: +2.5% yoy)—amid faster job creation in the formal sector, robust consumer credit and improving sentiment—while government spending jumped 6.6% (Q2: +1.8% yoy), propped up by sustained purchase of goods and services by the national government.
The external sector subtracted 1.0 percentage points from growth in Q3, after subtracting 0.6 percentage points from growth in Q2. Exports contracted 1.5% in Q3 (Q2: -2.0% yoy), dragged down by lower foreign sales of gold and oil, while imports growth accelerated to 2.4% (Q2: +0.5% yoy) on the back of firming domestic demand.
The economy is set to pick up some steam in 2020, following a notable slowdown in 2019, powered by stronger domestic demand and a more benign external backdrop. Fixed investment is seen keeping pace thanks to growing infrastructure spending, while private consumption should benefit from rising consumer confidence. Political uncertainty lingers in the background, however.