Peru’s private investment faces sharpest decline since 1999 amid economic and political challenges

Amid Peru’s economic slowdown, private investment has encountered significant challenges, marking potentially its most challenging first half since 1999.

As economic sentiments remain guarded locally, private investment has recorded three successive quarters of decline.

Economic experts predict the second quarter of 2023, set to be revealed soon, will follow the trend.

Excluding pandemic-related data, private sector investments in the first half of 2023 appear to have witnessed their steepest fall in 24 years, reminiscent of 1999’s 23% drop in the initial semesters.

Teo Crisólogo, an economist at the Peruvian Institute of Economics (IPE), revealed to Bloomberg that “Private investments are believed to have retreated by about 9.5% in Q2 2023.”

“Combining the nearly 12% drop from Q1 denotes almost an 11% fall for the first half.”

Factors like social upheavals, national roadway blockades, and climate anomalies, including the Yaku cyclone and El Niño’s coastal onslaught, contributed significantly.

Furthermore, Peru’s political atmosphere and persistently cautious economic outlook since April 2021 have further dampened short-term investment prospects.

While slight improvements have surfaced recently, optimism remains scarce.

Eduardo Jiménez, a partner at Macroconsult, commented on the troubling year, emphasizing the downturn in the construction sector as indicative of overarching trends.

Despite less pessimistic outlooks for H2 2023, experts predict a year-end with an overall negative trajectory.

Confidence among business leaders and recent positive shifts, especially in sectors closely linked to investments, could act as silver linings, hinting at potential turnarounds by December.

Juan Carlos Odar, Director of Phase Consultores, highlighted a glimmer of hope in rising capital goods imports, which saw a 7.2% jump in June.

“This might indicate a budding investment rebound in Q3”, Odar shared.

Crisólogo from IPE anticipates the H2 2023 decline to be milder than H1, hoping for a revival, especially in the non-mining investments.