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Downside risk to activity remain amid harsh weather conditions

Activity improved slightly in February as protests cooled down. The monthly GDP proxy fell by 0.6% yoy in February (from -1.1% in January), above market expectations of -1.0% (as per Bloomberg) and our forecast of -0.9%.  The quarterly annual rate of monthly GDP stood at a soft -0.2% in February (from 1.7% in 4Q22), dragged by non-primary activity (-1.4%, from 1.3%), while primary activity grew 5.8% (from 3.3%). Mining (0.3% yoy in February, from -3.6% in January), construction (-10.2%, from -11.7%) and lodging (-0.2%, from -4.3%) sectors - which were affected by protests in January - registered some improvement in February but remain weak. Services (1.5%) sector grew at a soft pace in February, while volatile fishing output grew 9.0%.



At the margin, activity improved in February. Using seasonally adjusted series, published by Peru’s statistics institute, the monthly GDP grew 0.5% mom in February (after falling by -1.4% in January affected by social protests), taking quarter over quarter (non-annualized) growth rate to -1.2%.  



We expect 1.8% GDP growth this year. After a slight recovery in February, severe weather conditions in the northern part of the country are likely to be a drag to the economy by the end of first quarter. Downside risks to activity will probably remain high in the coming months, with authorities officially on alert for a potential El Niño phenomenon through July and political uncertainty (with a potential return of protests) still elevated.


Julio Ruiz