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Peru Country Risk Report Q4 2018

Peru Country Risk Report Q4 2018

Key View:

Economic activity in Peru will strengthen over the coming quarters, driven by investment and production gains in the mining sector.

We forecast real GDP growth will accelerate to 4.0% in 2018 and 3.9% in 2019, from 2.5% in 2017.

The government will enter a fiscal consolidation cycle, balancing higher spending on reconstruction and infrastructure against spending cuts in other areas of the budget.

The BCRP will maintain an accommodative monetary policy through end-2018; however, higher rising fuel and food costs will push inflation higher in 2019, leading the BCRP to gradually raise interest rates.

President Martín Vizcarra will likely see out the remainder of former President Pedro Pablo Kuczynski's term through 2021. We do not expect a shift away from current business-friendly policies under the new administration.

Major Forecast Changes

We have made no major changes to our forecasts this quarter.

Key Risks

A sharper-than-expected slowdown in the Chinese economy would pose significant downside risks to our growth, FX and balance of payment forecasts for Peru, given its exposure to China via export and investment channels.

Vizcarra's position remains fairly tenuous, with further political upheavals in the country potentially undermining investor sentiment.


Executive Summary
Core Views
Major Forecast Changes
Key Risks
Country Risk Summary
Economic Risk Index
Political Risk Index
SWOT
Economic – SWOT Analysis
Political – SWOT Analysis
Economic Outlook
Economic Growth Outlook
Economy Seeing Robust Investment-Driven Growth
GDP By Expenditure Outlook
TABLE: PRIVATE CONSUMPTION FORECASTS
TABLE: GOVERNMENT CONSUMPTION FORECASTS
TABLE: FIXED INVESTMENT FORECASTS
TABLE: NET EXPORTS FORECASTS
TABLE: GDP GROWTH FORECASTS
External Trade And Investment Outlook
Current Account Deficit To Narrow On Mining Sector Gains
Outlook On External Position
TABLE: TOP FIVE GOODS EXPORTS IN 2017
TABLE: TOP FIVE GOODS IMPORTS IN 2017
Monetary Policy
Rates On Hold Through End-2018
Monetary Policy Framework
Fiscal Policy And Public Debt Outlook
Improving Revenues To Narrow Fiscal Deficit
Structural Fiscal Position
TABLE: MAIN REVENUE AND EXPENDITURE CATEGORIES
Peru Country Risk Q4 2018ContentsCurrency Forecast
PEN: Short-Term Weakness, Long-Term Strength
TABLE: CURRENCY FORECAST
10-Year Forecast
The Peruvian Economy To 2027
Economic Diversification And Private Consumption Underpin Long-Term Growth
TABLE: PRIVATE CONSUMPTION KEY TO GROWTH OUTLOOK
Political Outlook
Domestic Politics
Judicial Crisis Will Test Vizcarra's Weak Mandate
TABLE: POLITICAL OVERVIEW
Long-Term Political Outlook
Regional Tensions The Main Threat To Stability
Global Macro Outlook
Strong Growth, But Greater Headwinds Too
TABLE: GLOBAL MACROECONOMIC FORECASTS
TABLE: DEVELOPED STATES, REAL GDP GROWTH, % y-o-y
TABLE: EMERGING MARKETS, REAL GDP GROWTH, % y-o-y
Index Tables
TABLE: PERU – MACROECONOMIC DATA AND FORECASTS

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