Peru s fundamentals and economic outlook Julio Velarde Governor Central Bank of Peru. September 2015

Transcription

1 Peru s fundamentals and economic outlook Julio Velarde Governor Central Bank of Peru September 2015

2 Agenda 1. Peru s growth is based on strong fundamentals 2. Recent economic developments and prospects 3. Policy Framework 4. Concluding Remarks 2

3 Average GDP growth is among the highest in emerging economies Average GDP growth: Source: IMF, World Economic Outlook

4 After the financial crisis, Peru was the country with the fastest recovery and highest growth among the main Latin American ITers GDP of selected countries ( ) (Index 2007=100) Peru Colombia Chile Brazil Mexico Average GDP Growth Brazil 2,8 Colombia 4,8 Chile 4,6 Mexico 3,3 Peru 5,8 Average LATAM 3, Source: IMF and BCRP.

5 Average Inflation is the lowest among main Latin American economies Average Inflation: Brazil Mexico Colombia Chile Peru Peru (excludes food and energy) 5 Source: IMF, World Economic Outlook

6 Peruvian Credit rating of sovereign debt is BBB+ since 2013 China* Czech Republic Qatar Taiwan* Chile South Korea* Long term sovereign debt in foreign currency Malaysia* Poland Peru Mexico Colombia Philippines* Investment grade: BBB- Brazil India South Africa Hungary Indonesia* Russia Turkey Egypt AA AA- A+ A- BBB+ BBB BBB- BB+ B- 6 Source: Standard & Poors * Asia - Pacific

7 Taiwan Thailand China Malaysia Peru Philippines Hungary Czech Republic Korea Russia Poland Qatar United Arab Emirates India Brazil Mexico Turkey Chile South Africa Indonesia Colombia Egypt Greece International reserves are equivalent to 29 percent of GDP International Reserves: 2014 (% GDP) Source: IMF and Bloomberg

8 Public debt is among the lowest in emerging economies Gross public debt: 2014 (% GDP) Source: IMF and BCRP

9 Banking system has a low exposure to external liabilities 9.5 Short Term External Liabilities of the Banking Sector (% of GDP) * *Up to June

10 Dollarization ratio dropped to almost a half since 2005 Dollarization Ratio of Credit to the Private Sector (%) * 10 * Up to July 2015

11 Credit to GDP almost doubled since 2005 Credit to the Private Sector (% of GDP) * 11 * Up to June 2015

12 Peru s Gross fixed investment is among the highest in Emerging Economies Total investment (% of GDP) Total investment (% of GDP) Source: IMF. Chile Brazil Mexico Colombia Latin America Gross fixed investment (% of GDP) Source: IMF. India Indonesia Malaysia Philippines Private investment Public Investment % GDP Private 14,3 15,0 16,8 19,4 17,6 19,2 19,2 20,4 20,8 20,3 Public 3,1 3,2 3,5 4,5 5,7 5,9 4,8 5,4 5,8 5,5 12

13 Agenda 1. Peru s growth is based on strong fundamentals 2. Recent economic developments and prospects 3. Policy Framework 4. Concluding Remarks 13

14 GDP growth is expected to recover in the next few years Peruvian Annual GDP Growth (in percentages) * 2016* 2017** 14 *Consensus Forecast, August 2015 **Inflation Report, May 2015

15 Signs of recovery: Employment indicators 4.3 Employment (Annual percentage change) Source: Statistical Institute of Peru (INEI) 15

16 Signs of recovery: Electricity Production is growing faster than last year Source: COES 16

17 Mining sector has started to show higher growth rates

18 Copper production would increase by 88 percent in the period COPPER PRODUCTION (million of tons) Toromocho (Junín) Constancia (Cusco) 1.6 Las Bambas (Apurímac) Cerro Verde (Arequipa) 1.9 Toquepala Expansion (Tacna) * 2016* 2017* 2018* 18 * Forecast

19 Peru leads the exports of several agricultural and mining products AGRICULTURAL PRODUCTS US$ millions WORLD RANKING Quinoa Fresh asparagus Canned asparagus Organic banana Avocados Grape Paprika 90 5 Coffee 734 7* Artichoke 93 8 *Organic coffe ranks first. Source: Comtrade, FAO MINERAL PRODUCTS US$ millions WORLD RANKING Zinc Copper Lead Silver* Tin Molybdenum Gold *Includes refined and concentraded silver. Source: Comtrade, FAO 19

20 The current account deficit is financed by long-term private capital inflows CURRENT ACCOUNT AND LONG-TERM EXTERNAL FINANCING OF THE PRIVATE SECTOR: / (% of GDP) * 2016* 2017* * Forecast Current Account Long-term financing of the private sector 20 1/ Includes net foreign investment, portfolio investment and private sector's long-term disbursement.

21 Expansionary fiscal stance would contribute to revert economic cycle Fiscal Surplus (% of GDP) * 2016* 2017* * Forecast

22 Higher public investment in the following years Public Investment (% chg) * 2016* 2017* * Forecast

23 Agenda 1. Peru s growth is based on strong fundamentals 2. Recent economic developments and prospects 3. Policy Framework 4. Concluding Remarks 23

24 Feb/12 May/12 Aug/12 Nov/12 Feb/13 May/13 Aug/13 Nov/13 Feb/14 May/14 Aug/14 Nov/14 Feb/15 May/15 Aug/15 The Central Bank of Peru lowered its monetary policy interest rate 4 times since November 2013 Monetary policy interest rate (%)

25 Jan-11 Mar-11 May-11 Jul-11 Sep-11 Nov-11 Jan-12 Mar-12 May-12 Jul-12 Sep-12 Nov-12 Jan-13 Mar-13 May-13 Jul-13 Sep-13 Nov-13 Jan-14 Mar-14 May-14 Jul-14 Sep-14 Nov-14 Jan-15 Mar-15 May-15* Jul-15* Macro-prudential measures aim at securing sustainable credit growth and contributing to dedollarization: Domestic Currency Reserve Requirements are now lower than two years ago Domestic Currency Reserve Requirements (% of total obligations subject to reserve requirements) 30.0 Marginal Average * Preliminar

26 Jan-11 Mar-11 May-11 Jul-11 Sep-11 Nov-11 Jan-12 Mar-12 May-12 Jul-12 Sep-12 Nov-12 Jan-13 Mar-13 May-13 Jul-13 Sep-13 Nov-13 Jan-14 Mar-14 May-14 Jul-14 Sep-14 Nov-14 Jan-15 Mar-15 May-15* Jul-15* Macro-prudential measures aim at securing sustainable credit growth and contributing to dedollarization: Foreign Currency Reserve Requirements are now higher than last year Foreign Currency Reserve Requirements (% of total obligations subect to reserve requirements) 70.0 Marginal Average * Preliminar

27 As a result, we observe higher credit growth in domestic currency and lower credit growth in foreign currency ANNUAL GROWTH OF CREDIT TO THE PRIVATE SECTOR % Soles US$ Total

28 01-ene mar may jul sep nov ene mar may jul sep nov ene mar may jul sep nov ene mar may jul-15 Exchange Rate (Soles per dollar) FOREX Net Purchases (Millions of US$) Exchange Rates and FOREX Intervention Exchange Rate and Foreign Exchange Intervention FOREX Net purchases (MillIons OF US$) * *Up to August 27th Net purchases of FX Exchange Rate

29 02/01/ /02/ /03/ /04/ /05/ /06/ /07/ /08/ /09/ /10/ /11/ /12/ /01/ /02/ /03/ /04/ /05/ /06/ /07/ /08/ /09/ /10/ /11/ /12/ /01/ /02/ /03/ /04/ /05/ /06/ /07/ /08/ /09/2015 Currencies of main Latin American and Asian Countries have experienced a depreciation of more than 30 percent since Jan Cumulative Depreciation of Nominal Exchange Rate (in percentages) Indonesia Chile Mexico Peru India Singapur Peru Chile Indonesia India Singapur Mexico

30 Real Equilibrium Exchange Rate 30 The Equilibrium Real Exchange Rate takes into account the Peruvian relative productivity with respect to its trade partners, the terms of trade, the net foreign assets, the openness degree and the fiscal position.

31 Annual Inflation Forecast converges to the target range in

32 Agenda 1. Peru s growth is based on strong fundamentals 2. Recent economic developments and prospects 3. Policy Framework 4. Concluding Remarks 32

33 Concluding Remarks Exogenous factors have been affecting the economic cycle; however, the Peruvian economy holds strong fundamentals. During this period, the Central Bank has had an expansionary position, providing the required liquidity to the market. An active fiscal position is required to offset the lower private spending. It is necessary to deepen structural measures to strengthen the recovery of potential growth. 33

34 Peru s fundamentals and economic outlook Julio Velarde Governor Central Bank of Peru September 2015