Peruvian Economy Improves in Q1 2015

Driven by improved primary and service sectors, the Peruvian economy grew 1.7 percent in Q1 2015 after growing by 1.0 percent in Q4 2014, year over year. Manufacturing and construction remained weak.

March’s GDP Boosts Q1 Result

After starting 2015 with two relatively weak months, the Peruvian economy grew 2.7 percent in the last month of the quarter to take Q1 GDP growth to 1.7 percent. The agricultural sector grew 0.4 percent during the quarter, while the mining sector (14.4 percent of the economy) posted a 4.1 percent growth rate. Public utilities contributed with a 4.7 percent rate. Although this reports highlights the production or supply side of the economy it is clear that consumer demand was relatively strong during Q1. Commerce, which represents 10.2 percent of the economy, grew 3.6 percent during Q1.

The biggest disappointment for GDP growth in Q1 was growth in manufacturing, construction and fisheries, the only three sectors that posted negative rates of growth. Manufacturing, which represents 16.5 percent of the economy, was the biggest culprit of the weak GDP result dropping 5.2 percent during Q1. Meanwhile, construction, which represents 5.1 percent of the economy, dropped 6.8 percent during the quarter. Fisheries, which scantily represent 0.7 percent of the economy, posted a decline of 9.2 percent during the quarter.

The most dynamic sectors during Q1 were financial services and insurance, representing 3.2 percent of the economy, with a strong 10.4 percent growth rate, and telecommunications, representing 2.7 percent of the economy, with a growth rate of 9.0 percent. Meanwhile, other services, which represent 14.9 percent of the economy, posted a growth rate of 4.4 percent during Q1.

Thus, growth was broad-based and positive across the sectors, albeit a bit on the weak side, perhaps an environment that Peruvians will need to get used to in the coming years.

Struggling to Go Back to Past Performance

The Peruvian economy continues to struggle to go back to recent rates of GDP growth of between 5 and 10 percent. Peru, as the majority of the Latin American countries, benefited from the strong growth rates of the global economy spearheaded by growth in the Chinese economy. However, weaker commodity prices and exports growth have also hit one of the best managed economies in South America.

So far, the path to recovery for the Peruvian economy looks a bit more promising than the ones for Chile and Brazil, both of which have had issues with corruption allegations that have made economic conditions a little more challenging to overcome. Thus, we see the Peruvian economy continuing to improve over the next several years. However, we do not expect the Peruvian economy to go back to the rates of growth it experienced during the first decade and a half of this century.