Despite the minister’s optimism, Peru teeters on the brink of a technical recession

The Peruvian Economy and Finance Minister, Alex Contreras, announced on Tuesday that the nation’s economy is expected to contract close to 1%, similar to the fall observed in January.

This contraction could mark two consecutive quarters of economic decline for Peru.

“We anticipate a contraction due to impacts on fisheries and agriculture,” said Contreras at a press conference, where he announced measures to stimulate the country’s activity.

Several analysts had already predicted this two-quarter economic downturn, a condition known as a technical recession.

Peru’s economic activity was disrupted earlier this year due to social protests against the government of Dina Boluarte, and climate events, including the coastal El Niño and Cyclone Yaku further impacted it.

The Economy and Finance Ministry (MEF) considers the current economic downturn temporary, forecasting a rebound of 1% growth in July.

The projections for the end of the year will be revealed later in August.

Contreras affirmed that investment confidence has recovered, ensuring the current economic shock will not extend. He also criticized those claiming that Peru is in a recession.

“It’s not that there’s no investment. Some people want this government to fail. (…) There is also a group of economists obsessed with saying that the economy is in recession, but it is not,” the MEF chief expressed.

Contreras noted that the drop in private investment in the first quarter of 2023 (over 12%) would lessen in the second quarter.

While he didn’t provide a specific figure, he mentioned that the impact of the Quellaveco project, which involved heavy private investment in the first half of 2022, would continue to be felt.

Peru has implemented various economic measures totaling over 15 billion soles to stimulate its economy.

Economic prospects for the country have dimmed, with some economists expecting growth below 2%, possibly even closer to 1%, by the end of 2023.