BBVA Research: Peru’s Economy to Expand 10% in 2021

RIO DE JANEIRO, BRAZIL – After closing 2020 with a contraction of around -11.5%, the Peruvian economy will expand 10% in 2021 largely supported by a “rebound effect” of 8 percentage points, BBVA Research projected on Thursday, January 21st.

The Peruvian Ministry of Economy said on January 11th that it expected GDP of the world’s second largest copper producer to grow an annual average of 5.1% between 2021 and 2026

In its macroeconomic forecast base scenario, BBVA Research considers an external environment “relatively favorable for Peru” —despite the increase in COVID-19 contagion cases— thanks to the recovery of the world’s economy, high metal prices, and capital flows into emerging markets.

“Domestically, it is assumed that —in the event of spikes in infections— restrictions on mobility will be focalized. Thus, their economic impact will be relatively limited,” it emphasized.

In its Report titled Situación Perú 1T2021 (Peru’s Situation 1Q 2021), the BBVA Research baseline scenario also considers that the uncertainty associated with regulatory issues and the electoral process will remain high in the first months of 2021, which will affect spending decisions of the private sector.

“The sectors with the greatest progress in 2021 will be construction, metal mining, and commerce,” it stressed.

Furthermore, BBVA Research mentioned that business activity will complete its normalization cycle and get an additional positive boost from generalized access to the COVID-19 vaccine, resulting in a growth of 4.5%.

On the external side, BBVA Research stressed that the global economic activity picked up more than expected in the third quarter of 2020, although it became moderate in the fourth quarter due to the increase in infections in the United States and Europe.

“The process of administering vaccines against COVID-19 is starting to move forward in some of the world’s main economies, which will lead to greater dynamism in the coming months,” it stated.

In this sense, BBVA Research said that —thanks to the support of economic stimuli— financial tensions have returned to pre-crisis levels. This has favored stock markets, metal prices, and risk premiums in Latin America.

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