PERU – Sequential GDP growth improved in August

The further reopening of the economy supported the improvement in economic activity

Julio Ruiz

15/10/2021


Annual GDP growth figures continued to slowdown in August as the favorable base effect (due to strict social distancing measures a year ago) fades away. The monthly GDP proxy expanded 11.8% year over year in August (from 12.9% in July), above our forecast of 10% and market expectations (as per Bloomberg). As a result, the quarterly annual rate stood at 15.8% in August (from 41.9% in 2Q21). On the natural resources side, mining output gained 3.2% year over year in the quarter ended in August (from 38.9% in 2Q21), while volatile fishing output fell by 37.5% (from 21.2%). Meanwhile, looking at the non-natural resources sector, construction output and services quarterly annual growth rate stood at 45.7% in August (from 230.9% in 2Q21) and 18.6% (from 26.9%), respectively.



At the margin, the monthly GDP expanded in August amid a further reopening of the economy. Using seasonally adjusted series, published by Peru’s statistics institute, the monthly GDP grew 1.5% month over month in August (from 0.2% in July and 0.6% in June), taking the quarter over quarter growth rate to 2.4%. We note hotels and restaurants activity index posted a large monthly growth rate of 22.8% in August (also using seasonally adjusted figures), consistent with the easing of social distancing measures.



We expect GDP growth of 11.0% for 2021, supported by the reopening of the economy, high terms of trade and a still expansionary monetary policy. However, lingering uncertainty over the direction of economic policy and a possible delay in public capital-expenditure execution due to the transition between administrations could curb growth.

Julio Ruiz