Itaú BBA - PERU – Economic recovery continued in July

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PERU – Economic recovery continued in July

September 15, 2020

Natural and non-natural resources sectors are supporting the recovery.

Monthly GDP continued recovering in July supported by both natural and non-natural resources sectors. The monthly GDP proxy contracted 11.7% year-over-year in July (from -18.1% in June), below our forecast of -9.6% and in line with market expectations (as per Bloomberg), taking the annual quarterly rate to -20.9% in July (from -30.2% in June). The natural resource sectors also recovered further in July (-3.8% year-over-year, from -5.5% in June), driven mainly by volatile fishing component (33.3%, from 48.1%) and mining (-6.2%, from -14.4%) as distancing measures in those sectors were eased. Likewise, the non-natural resource sectors fell by 15.1% year-over-year in July (up from -22.1% June), with construction (-12.8%, from -44.6%) and services sector (-15.8%, from -18.4%) contracting by less than in the previous month.   

Still, economic activity is below pre-outbreak levels (February). Using our own seasonally adjusted series, month-over-month growth stood at 7.7% in July (from 22.1% in June), taking the quarter-over-quarter annualized rate to -11.3% in July. GDP proxy in July is 13.1% below February levels.

We expect GDP to fall by 11.9% in 2020. We expect a recovery in 2H20, supported by a large fiscal stimulus and an expansionary monetary policy. Uncertainty from recent escalation in political confrontation and market unfriendly measures from congress is a downside risk to the economic recovery.

Julio Ruiz

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