PERU – Soft sequential activity in 2Q21

Annual growth is still reflecting a favorable base effect

Julio Ruiz


The monthly GDP annual growth in June slowed down as the favorable base effect (due to strict social distancing measures a year ago) faded away. The monthly GDP proxy expanded 23.5% year over year in June (from 48.3% in May), above our forecast of 20.8%. As a result, the quarterly annual rate stood at 41.5% in 2Q21 (from 3.8% in 1Q21). On the natural resources side, mining output stood at 38.8% year over year in 2Q21 (from -0.1% in 1Q21), while volatile fishing output grew 22.1% (from 38.6%). Meanwhile, looking at the non-natural resources sector, construction output and services quarterly annual growth rate stood at a large 230.7% in 2Q21 (from 41.5% in 1Q21) and 32.7 (from -1.5%), respectively, mainly reflecting a favorable base effect.

At the margin, the monthly GDP posted its second consecutive positive monthly growth in June, but momentum remained soft in 2Q21 due to a weak April. Using seasonally adjusted series, published by Peru’s statistics institute, the monthly GDP grew 0.6% month over month in June (from 3.1% in May and from -2.6% in April), taking the quarter over quarter growth rate to a soft -0.9% in 1Q21.

We expect GDP growth of 10.2% for 2021, supported by a positive carryover, still expansionary monetary policy, and better terms of trade. On the other hand, uncertainty from the political environment and a possible delay in the execution of public capital expenditure due to the transition between administrations will likely curb sequential growth. A resurgence of the outbreak with a still low percentage of the population vaccinated, leading to a retightening of social-distancing measures, is also a downside risk to our outlook.

Julio Ruiz