PERU – Activity in May improved sequentially

Annual growth in monthly GDP was boosted by a favorable base effect

Julio Ruiz


The monthly GDP in May was supported by a favorable base effect (strict social distancing measures which affected activity a year ago). The monthly GDP proxy expanded 47.8% year over year in May (from 58.5% in April), above our forecast of 44.6% and market expectations of 42.6% as per Bloomberg. As a result, the quarterly annual rate stood at 39.5% in May (from 3.8% in 1Q21). On the natural resources side, mining output stood at 43.0% year over year in the quarter ended in May (from -0.1% in 1Q21), while volatile fishing output grew 88.6% (from 38.6%). Meanwhile, looking at the non-natural resources sector, construction output and services quarterly annual growth rate stood at a large 268.4% in May (from 41.5% in 1Q21) and 33.2% (from -1.5%), respectively, mainly reflecting a favorable base effect.

At the margin, the monthly GDP recovered in May amid some easing of social distancing measures. Using seasonally adjusted series, published by Peru’s statistics institute, the monthly GDP accelerated to 3.4% month over month in May, supported mainly by commerce and services sectors. Still, activity momentum remained soft as the quarter over quarter growth rate stood at -1.3% in May.

We expect GDP growth of 10.2% for 2021, supported by a positive carryover, still expansionary monetary policy and better terms of trade, which will be mitigated by uncertainty over the domestic policy direction and the transition between administrations (in the first year of a new administration, there is usually a delay in expenditure execution).

Julio Ruiz