BMI View: Despite near-term economic challenges, stemming from extreme flooding and delays to key infrastructure projects, we believe the outlook for Peru's consumer environment will improve over the second half of 2017 and into 2018. Falling inflation, combined with lower interest rates and reforms aimed at stimulating the economy, will strengthen the confidence and spending power of consumers over the coming quarters.
Widespread flooding in March/April 2017 - among the worst to hit Peru in the last century - caused severe economic damage and will dampen our previously optimistic outlook for consumer spending in Peru in 2017. About 3,231km of national roads were damaged in the floods and an estimated 700,000 people were left homeless. A significant number of retailers and shopping centres were also forced to close, in some cases for several weeks. Coupled with delays to planned infrastructure projects, the pace of economic activity has slowed considerably over the first half of 2017. As a result, our Country Risk team have revised down Peru's real GDP forecast to 2.8% from 4.0% for 2017; while private consumption will grow by a modest 1.8% y-o-y in 2017, down from 3.4% in 2016.