Peru’s GDP Growth Slower than Expected in December, But 2013 Outlook Remains Strong

Peru’s gross domestic product grew by a weaker-than-expected 4.31 percent in December, but the outlook for the country’s economic activity remains bright.

Economic activity slowed down in December compared to previous months, as the fishing sector saw a sharp decline and construction activity was less robust.

The fishing sector fell 47.8 percent in December compared to a year earlier, while the construction sector grew 5.34 percent. Construction had led Peru’s growth for most of this year, expanding 15.17 percent for the full-year 2012.

Peru’s retail sector grew 6.95 percent in December, while transportation and communications sector gained 7.38 percent in the month. The important mining and hydrocarbons sectors contracted 1.67 percent in December, the government said Friday.

For the full-year, Peru’s GDP rose 6.29 percent, which was in line with expectations from the government and private sector economists.

Despite the slowdown in December, Peru’s economy will likely continue to post strong growth this year, many economists say.

BBVA Banco Continental, the second biggest bank in Peru, said in a report that December’s results are most probably an anomaly.

“We believe that the slowdown in December is transitory to the extent that it is mainly related to the intense contraction of the fishing industry, in which production is highly volatile, while the components related to domestic demand, such as Commerce and Services, keep growing strongly,” the bank said.

“We expect that both private and public expenditure will drive output growth in the coming months at an average pace of more than 6.0% YoY.”

The International Monetary Fund said Thursday that it expects Peru’s GDP to grow 6.3 percent this year.

“Growth is strong, inflation and public debt are low, and progress has been made in reducing poverty and improving living standards. The near term outlook remains favorable despite the adverse external environment,” the IMF said.

Some private sector economists say that growth will likely not be as robust in the coming months as many expect, but still remain strong.

Morgan Stanley said Friday it expects Peru’s economic growth to moderate in 2013 and expand 5.5 percent. “The main drivers of the slowdown appear to be softening domestic demand, on the back of declines in terms of trade, and weaker public spending,” it said.

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