The International Monetary Fund expects Peru’s fiscal and monetary measures will help support an economy that almost ground to a halt in recent months after years of robust growth, daily Gestion reported.
The IMF’s director general, Christine Lagarde, met with Peruvian Finance Minister Alonso Segura on Wednesday in Washington, D.C. during the annual governors meeting of the IMF and the World Bank.
The IMF cut its forecast for Peru’s economic growth this year to 3.6% from 5.5%. The World Bank also this week lowered its projection for growth of Peru’s gross domestic product to 3.5%, also from a previous 5.5% outlook.
Lagarde said Peru’s economy has been impacted by infrastructure bottlenecks and lower global prices for its raw materials.
“Peru grew very rapidly over the past 10 years, among the fastest of the Latin American countries, but at the start of this year, in the first months, it was impacted by a reduction in the prices for raw materials that the country exports and also the results of infrastructure bottlenecks,” Lagarde said.
“Growth has been really affected in the first months of this year by the combination of these two factors,” she said.
Peru’s GDP hit bottom in the second quarter. In June, the GDP grew just 0.3% year-over-year. Growth was still sluggish in July, but a little better at 1.16%.
Lagarde said that she thinks the government’s measures to stimulate the economy, which have included streamlining permitting processes for investment projects, should help Peru to “return to the economic growth that it had before.”
“This isn’t easy from a political point of view,” she added. “I understand that in Peru there is a coalition government, but I hope that all the members of this coalition are focused on getting over this situation.”
The Central Bank has also been lowering its reference interest rate to stimulate lending.
Peru has become accustomed to consistent growth of over 6% in recent years. The government expects a rebound next year, with growth at about 5.5% thanks to new mine and infrastructure projects.
During the Washington, D.C. meetings Lagarde and Segura also discussed the plans for the 2015 IMF-World Bank annual governors meeting, which will be held in Lima at a new convention center complex being built by the government in San Borja next to the Ministry of Culture and the National Theater. The convention center is scheduled to be completed by July 2015.