Itaú BBA - PERU – Decent monthly GDP growth before COVID-19

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PERU – Decent monthly GDP growth before COVID-19

Abril 15, 2020

Economic activity to deteriorate sharply amid coronavirus outbreak

Monthly GDP was above market expectation in February. The monthly GDP proxy grew 3.8% year-over year in February (from 3.0% in January), above our forecast of 3.3% and market expectations of 2.8% (as per Bloomberg), taking the quarterly annual growth rate to 2.5% in February (from 2.0% in January).

Economic activity grew at solid pace pre-coronavirus outbreak, supported by natural resource sectors.  Non-natural resource sectors, which account for three quarters of the economy, stood at 3.0% year-over-year in February (from 3.1% in January), taking the quarterly annual growth rate to 2.8% in February (from 2.4% in January). Looking at the breakdown, while construction output grew at solid pace (5.1% year-over-year in February, practically unchanged from January), associated to an improvement in public capital expenditure execution, services and commerce sectors slowed down slightly to 2.5% (from 2.7%) and 3.7% (from 3.8%), respectively.  In turn, natural resource sectors recovered to a strong 6.9% year-over-year in February (from 2.6% in January), taking the quarterly annual growth rate to 1.6% in February (from 0.3% in January). Natural resources sector was supported by fishing output (19.3% year-over-year in February, from -32.7% in January), while primary manufacturing and mining output expanded 24.1% (from 2.1%) and 5.3% (from 0.8%), respectively.

At the margin, GDP momentum improved. Using our own seasonally adjusted series, the GDP quarter-over-quarter annualized growth rate stood at 2.8% in February (from 1.4% in January).

We forecast a GDP contraction of 1.3% in 2020, as activity deteriorate sharply due to the negative shock from the coronavirus outbreak. We expect the economy to recover during the second half of the year, supported by an expansionary monetary policy (lowest policy rate on record) and a substantial fiscal stimulus. 

Julio Ruiz

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