Economic Perspectives on Peru and the Region. Julio Velarde President Central Bank of Peru. December 6, 2018

Transcription

1 Economic Perspectives on Peru and the Region ulio Velarde President Central Bank of Peru December 6, 2018

2 Since the 90s, Peru s growth rate was higher than the regional and world average. verage GDP growth by decades Emerging sia Latm World Peru 4,4 5,6 5,4 5,3 6,6 6,7 6,0 3,9 3,7 7,3 3,3 3,2 3,2 3,9 7,7 2,6 3,8 5,0 1,5-1,0 60s 70s 80s 90s * Emerging sia for 60s and 70s only considers Emerging East sia & Pacific. Source: World Bank (for 60s and 70s), WEO (80s, 90s and ) and BCRP Inflation Report (Peru). 2

3 * Since 2008, Peru GDP growth rate has been leading the region Latin merica and the Caribbean: real GDP index (2000=100) Country verage annual growth exico 2,0 rgentina 2,2 Chile 3,8 Colombia 3,9 Peru 5,0 Latm 2,6 Peru Colombia Chile Latam rgentina exico *Forecast. Source: WEO and BCRP Inflation Report (Peru). 3

4 * 2019* * 2019* * 2019* In 2018 and 2019, Peru s growth will be among the highest in the region. Latm Peru verage annual growth : 5.0% Pacific lliance Countries 1 verage annual growth : 2.6% 4,0 2,5 4,0 4,0 verage annual growth : 2,8% 2,9 3,1 1,3 1,2 2,2 2,2 1,8-0,6 *Forecast. 1/ Excludes Peru Source: IF (WEO, Oct. 2018) and BCRP Inflation Report (Peru). 4

5 Investment in Latin merican countries is expected to maintain its average value. Gross Fixed Capital Formation (% GDP) 35 verage * Emerging market and developing economies rgentina exico Chile Peru Colombia Latin merica and the Caribbean Brazil * Forecast Source: IF (WEO, October 2018) and BCRP Inflation Report (Peru). 5

6 Peru s annual inflation is among the lowest in the region and will converge towards the target center in Latin merica: average annual inflation* and estimated 2019 inflation verage inflation, Estimated inflation, ,5 20,2 15,1 8,5 8,1 6,8 6,4 6,5 4,1 3,0 4,2 5,5 4,8 4,7 4,7 4,3 4,9 4,5 3,2 2,7 2,6 3,0 0,1 3,1 3,0 2,4 2,0 Venezuela rgentina Uruguay Dominican Costa Rica Brazil Latm Bolivia Colombia Ecuador exico Chile Panama Peru Republic * End of period inflation. Source: WEO and BCRP Inflation Report (Peru). 6

7 Next year, Latam-5 central banks may begin with the withdrawal of the monetary stimulus onetary conditions: inflation gap, neutral interest rate and policy rate Inflation gap (actual minus target) Neutral real rate range Current real ex-ante policy rate Brazil Chile Colombia exico Peru Source: Goldman Sachs and BCRP (Peru). 7

8 group of Latin merican countries has promoted government debt reduction in the last 20 years. The other group should reduce its debt in order to achieve fiscal consolidation General Government Gross Debt (% GDP) 2018* Venezuela Brazil Uruguay LC rgentina exico Costa Rica Bolivia Colombia Ecuador Panama Dominican Republic Peru Chile Paraguay * Forecast Source: IF (WEO, October 2018) and BCRP Inflation Report (Peru). 8

9 The current account deficit is expected to remain at sustainable levels (and among the lowest in the region), and will continue to be covered mostly by long-term private sector external financing. CURRENT CCOUNT ND LONG-TER PRIVTE SECTOR EXTERNL FINNCING 1/ (% GDP) 7,0 9,3 Current account Long-Term Private Sector External Financing 10,8 9,8 7,8 7,0 6,6 5,7 4,6 5,0 4,0 % GDP Current ccount Balance * 2019* rgentina -4,9-3,7-3,2 Chile -1,5-2,5-2,7 Colombia -3,3-2,4-2,4 Brazil -0,5-1,3-1,6 Peru -1,1-1,6-1,5 exico -1,7-1,3-1,3-0,5-2,4-1,7-2,8-2,7-1,1-1,6-1,5 * Forecast Source: IF (WEO, October 2018) and BCRP (Peru). -4,6-4,4-4, * 2019* 1/ Includes net foreign investment, portfolio investment, and private sector long-term disbursements. * Forecast. Source: BCRP Inflation Report. 9

10 Peru s international reserves will be around 26 percent of GDP and will represent 4 times the short-term external debt. INTERNTIONL COVERGE INDICTORS * 2019* NIR as a % of: a. GDP 32,5 30,8 32,1 31,7 29,7 26,9 26,2 b. Short-term external debt 1/ c. Short-term external debt plus current account deficit / Includes short-term debt balance plus redemption (1-year) of private and public sector. Net International Reserves (US$ billons) 65,7 62,3 61,5 61,7 63,6 61,1 61,9 * Forecast. Source: BCRP Inflation Report * 2019* 10

11 The high NIR, a sustainable current account and a low short-term external debt guarantee external soundness External Vulnerability Indicator: 2018 (% GDP) Saudi rabia Thailand Russia Peru China Vietnam Philippines Brazil exico India Egypt Colombia Indonesia alaysia Chile South frica rgentina Venezuela -12,5 Turkey -14,7-6,6-1,1 0,9 0,3 6,8 6,8 6,4 5,3 7,4 15,2 14,9 12,7 15,7 19,9 24, Note: Indicator = [ Official Foreign Exchange Reserves - Short-term External Debt + Current ccount Balance] / GDP. Source: oody s and BCRP. 42,7 71,6 Higher external soundness Lower external soundness 11

12 and allows Peru to soften the impact of external financial shocks. FX depreciation 2018* (currency unit per US$ - % change) rgentina Turkey Brazil Russia South frica India Chile Indonesia Colombia Philippines China Peru exico alaysia Thailand Ucraine -0,2 15,6 15,4 10,5 10,5 8,9 6,8 6,3 5,2 5,0 4,6 4,0 2,5 0,5 42,3 98,3 * Percentage change as of December 4 of 2018 with respect to December 31 of Source: Bloomberg and Reuters. 12

13 Fiscal deficit will decrease due to higher tax collection and lower tax refunds. NON-FINNCIL PUBLIC SECTOR SURPLUS/DEFICIT: (% GDP) 2,1 2,3 0,9-0,3-2,0-2,5-3,1-2,8-2, * 2019* *Forecast. Source: BCRP Inflation Report. 13

14 Fiscal deficit path will lead to an increase in the gross debt, but up to sustainable levels. 21,6 Gross Debt in foreign currency Gross Debt in local currency Net Debt NON FINNCIL PUBLIC SECTOR DEBT: (% GDP) arch 2018 verage maturity of debt (years) 12,1 Share of debt in foreign currency (%) 65 25,7 24,9 23,3 23,8 19,9 19,2 19,9 26,9 10,2 10,1 7,6 11,4 9,8 3,9 10,4 11,1 8,8 8,8 2,7 3,0 17,8 12,2 13,5 16,1 16,8 5,4 11,1 10,4 11,4 9,5 6,8 8,8 9,0 9,1 13, * 2019* *Forecast. Source: BCRP Inflation Report. 14

15 Sovereign yields reflect a positive investor sentiment towards Peru s financial position. Peru s solid macroeconomic indicators provide assurances of a sound economic performance. ene.-16 feb.-16 mar.-16 abr.-16 may.-16 jun.-16 jul.-16 ago.-16 sep.-16 oct.-16 nov.-16 dic.-16 ene.-17 feb.-17 mar.-17 abr.-17 may.-17 jun.-17 jul.-17 ago.-17 sep.-17 oct.-17 nov.-17 dic.-17 ene.-18 feb.-18 mar.-18 abr.-18 may.-18 jun.-18 jul.-18 ago.-18 sep.-18 oct Year Sovereign Yields in Local Currency Chile Peru Colombia exico Brazil ,55 5,17 6,48 7,65 10, ,41 5,64 6,96 9,12 9,97 Difference (bps) Sovereign Ratings (local currency) S&P oody's Fitch Chile Peru exico - 3 BBB+ Colombia BBB Baa2 BBB Brazil BB- Ba2 BB Brazil exico Colombia Peru Chile 3 Source: Bloomberg and inistry of Economic and Finance (EF). 15

16 Q Q Q Q Q Q Q Q Q Q Q Q4-2018* Economic activity has been recovering since the second quarter of GDP growth (YoY% change) 5,5 4,6 4,8 4,9 3,9 3,0 3,2 2,3 2,6 2,7 2,3 2,3 *Forecast. Source: BCRP Inflation Report. 16

17 Public investment has increased in line with progress of the works on the Pan merican Games and the El Niño Reconstruction program. Q Q Q Q Q Q Q Q Q Q Q Q4-2018* Public Investment (YoY% change) 31,4 21,0 6,1 0,3 5,5 1,6 5,5 8,4-5,7-1,6-13,8-17,4 *Forecast. Source: BCRP Inflation Report. 17

18 fter 14 consecutive months of decrease, private investment has recovered since the second half of I.12 II III IV I.13 II III IV I.14 II III IV I.15 II III IV I.16 II III IV I.17 II III IV I.18 II III IV* 20 Private Investment (YoY% change) ,2 10,6 4,9 0-2, consecutive quarters of decline *Forecast Source: BCRP Inflation Report. 18

19 .17 F S O N D.18 F S O N.17 F S O N D.18 F S O Private sector confidence remains high. Business expectations on the economic situation for the three and twelve months ahead Economy in the 3 ahead Economy in the 12 ahead 70 Business expectations on the familiar economy situation for the twelve months ahead (INDICC, Lima etropolitana) Optimistic area Optimistic area Pessimistic area 45 Pessimistic area Source: poyo, BCRP. 19

20 Expected investment : over US$ 28 billion. SECTORS (US$ millions) : IN INVESTENT PROECTS (US$ millions) ining (14 690) Quellaveco (3 450) Pampa del Pongo (1 800) ina usta (1 230) Zafranal (895) ichiquillay (700) Infrastructure (6 026) Hydrocarbons (2 213) Electricity (1 592) Industrial (806) Other sectors (2 732) Lima etro Line 2 (1 450) Expansion of Lima s orge Chavez International irport (1 000) Port terminals requipa, Salaverry, Chancay, Paita, Ica y Loreto (1 118) Highways (955) Block 39 exploration (730) Block Z-2B exploration and drilling (400) Santa Teresa II Hydroelectric expansion (450) ajes I and ajes II Hydroelectric (350). itsubishi Phosphate Processing Plant (430) Intercorp Shopping Center (EX-San artin quarter) Lima (650)

21 .17 F S O N D.18 F S.17 F S O N D.18 F S Private consumption has been driven by better labor market conditions. Total Income of Private Formal Employment (YoY % nominal change) 4,4 3,9 4,24,0 4,2 3,4 3,4 4,04,5 3,23,3 2,4 4,4 4,4 8,6 9,1 8,9 7,3 6,5 10,7 7,6 Private Formal Employment (YoY % change) 5,7 4,7 4,7 4,3 4,3 4,1 3,8 3,7 2,9 3,0 2,8 2,6 2,6 2,7 2,4 2,1 2,1 2,2 2,1 2,1 1,4 an-set Total 4,2 Source: SUNT gricultural exports 17,1 griculture and livestock 17,4 ining 3,5 21

22 Financial Sector indicators show clear signs of greater dynamism. Consumption (YoY % change) Credit to the Private Sector (YoY % change) 5,4 4,7 4,2 4,3 4,8 4,8 4,8 4,6 5,2 6,2 6,9 7,3 10,0 10,8 10,6 10,9 11,5 10,910,8 10,1 7,8 8,7 4,9 5,1 5,7 6,0 7,4 8,0 8,0 7,4 6,9 7,6 7,3 6,8.17 F S O N D.18 F S O 1,6 1,7 2,3 1,7 1,7 1,7 1,7 3,6 ortgages (YoY % change) 0,5 0,4.17 F S O N D.18 F S O 5,6 7,6 7,1 7,3 7,7 8,3 8,5 8,4 7,9 8,2 8,4 8,1 6,8 1,8 1,7 1,1 1,3 1,8 2,0 1,9 1,7 2,8.17 F S O N D.18 F S O Source: BCRP 22

23 .17 F S O N D.18 F S O N.17 F S O N D.18 F S O Electricity and cement consumption has accelerated 6,2-2,0 0,8-0,4 3,3 3,6 1,2 2,0 1,6 1,0 0,1 Electricity (YoY % Chg.) -0,6-0,4 1,8 3,6 6,2 3,0 3,4 3,9 2,6 3,2 6,2 5,1-4,5-5,7-6,5-8,8-1,9 Cement consumption (YoY % Chg.) 3,5 3,5 4,2 1,4 6,6 4,1 6,7 6,5 4,3 4,1 8,2 8,2-0,3 2,2 0,3 1,6 5,0 Source: BCRP. 23

24 Consequently, GDP is expected to grow 4% in the next two years, driven by domestic demand, particularly investment and private consumption. GDP (YoY % Chg.) verage * 2019* Domestic Demand 6,4 1,4 4,4 4,0 Private consumption 6,1 2,5 3,8 3,6 Public consumption 6,3 0,2 3,4 3,2 Private investment 7,9 0,2 5,5 6,5 Public investment 9,1-2,3 9,9 2,8 Exports 4,0 7,8 3,5 4,6 Imports 7,2 4,1 5,0 4,7 GDP 5,5 2,5 4,0 4,0 emo: Primary GDP 3,6 3,1 2,6 4,2 Non-primary GDP 6,1 2,3 4,3 4,0 *Forecast. Source: BCRP Inflation Report. 24

25 an-15 ar-15 ay-15 ul-15 Sep-15 Nov-15 an-16 ar-16 ay-16 ul-16 Sep-16 Nov-16 an-17 ar-17 ay-17 ul-17 Sep-17 Nov-17 an-18 ar-18 ay-18 ul-18 Sep-18 Nov-18 Inflation has remained in the target range since une. 7,0 6,0 5,0 Inflation (YoY% change) verage Nov.18 Inflation: 2.7% 2.2% Excluding food and energy 2.1% 2.2% Food and energy 3.2% 2.2% 4,0 3,0 2,0 2,17 2, aximum Target range 1,0 0,0-1,0 Inflation Food and energy Excluding food and energy inimum -2,0 Source: BCRP. 25

26 Since arch, the Central Bank has maintained its interest rate at 2.75%. Nominal and Real Reference Rate (%) Reference rate (%) Dec ay ,0 ul Sep ,0 Nov ,0 4,0 3,0 Nominal 3,50 4,25 3,00 an ar ,75 2,0 1,0 Real* 1,59 0,0-1,0 0,08 0,25 0,77 0,31-2,0 Feb-15 ul-15 Dec-15 ay-16 Oct-16 ar-17 ug-17 an-18 un-18 Nov-18 *Ex-ante (with the inflation expectation one year ahead) Source: BCRP. 26

27 Inflation is expected to converge towards the target center in Inflation Forecast Inflation Forecast CPI 1,4 2,2 2,0 1. CPI excluding food and energy 2,1 2,3 2,0 i. Goods 1,2 2,2 1,7 ii. Services 2,7 2,3 2,2 2. Food and energy 0,5 2,2 2,1 i. Food 0,3 2,1 2,1 ii. Energy 1,6 2,4 2, *Proyección Source: BCRP Inflation Report. 27-1

28 Economic Perspectives on Peru and the Region ulio Velarde President Central Bank of Peru December 6, 2018