Peru’s Domestic Demand Offsetting Weak International Economy

As the international economy continues to struggle, Peru’s gross domestic product has reported robust growth in recent months thanks to strong domestic demand, according to the Central Bank, BCR.

Domestic demand in Peru has offset a decrease in exports, which have been mainly caused by lower metals prices as demand for minerals tightens.

After growing by a weak 4.4 percent in April, Peru’s economy has expanded by 6.5 percent in May and 7.1 percent in July, according to government figures. Economic growth in the second quarter of this year came in at a strong 6.1 percent.

Peru’s Finance Ministry says that Peru’s “potential” growth is around 6.5 percent. The government wants to increase this rate of growth to 8 percent through the development of infrastructure projects, state news agency Andina reported.

“Some current indicators… show that economic growth has stabilized around its long-term sustainable level, even though indicators linked to the foreign market show week performance,” said Adrian Armas, the Central Bank’s head of economic studies.

Early indicators for July and August show that economic growth will likely remain strong, he said.

Electricity production, for example, rose 6.3 percent in July and August, while cement consumption increased 15 percent in the past few months and 17 percent in August, according to Armas.

As a result, economic analysts polled by the Central Bank now forecast that Peru’s GDP will rise 5.8 percent in 2012, up slightly from a previous estimate of 5.7 percent.

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