Itaú BBA - PERU – March’s monthly GDP contracted sharply amid the outbreak

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PERU – March’s monthly GDP contracted sharply amid the outbreak

Maio 15, 2020

The deterioration in economic activity was generalized.

Monthly GDP contracted sharply in March reflecting the outbreak impact (including the social distancing measures). The monthly GDP proxy contracted 16.3% year-over-year in March (from 3.8% in February), above our forecast of -18.9% and below market expectations of -14.2% (as per Bloomberg). The figure implies the GDP quarterly annual rate for the 1Q20 was -3.5% (from 1.8% in 4Q19).

The deterioration in economic activity was generalized. The negative shock in the economy from the outbreak started being reflected since March, month when the distancing measures initiated (see chart below). The non-natural resource sectors were dragged by commerce (-6.2% year-over-year in 1Q20, from 3.6% in 4Q19), construction (-13.0%, from -4.6%) and non-primary manufacturing (-12.0%, from -0.3%). In turn, non-natural resource sectors were driven down by a contraction in fishing (15.3% year-over-year in 1Q20), mining (5.3%) and primary manufacturing (0.9%) output. 

At the margin, GDP deteriorated sharply. Using our own seasonally adjusted series, the GDP quarter-over-quarter annualized growth rate was -18.4% in 1Q20 (from 0.4% in 4Q19). 

We expect GDP to contract 3.7% in 2020, affected by a negative shock from COVID-19 in the 1H20. The recovery in the 2H20 will be supported by an expansionary monetary policy and a substantial fiscal stimulus.

Julio Ruiz



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