Peru s Fundamentals and Economic Outlook

Transcription

1 Peru s Fundamentals and Economic Outlook Julio Velarde Governor Central Bank of Peru October 2016

2 Content 1. Slow Global Recovery 5. Gradual withdrawal of monetary stimulus 2. Reversal in Peru s external accounts 4. Lower fiscal deficit 3. Growth in line with potential output

3 Gradual recovery of global growth with financial risks associated with expected tightening of U.S. monetary policy. World Output * 2017* 2018* World 3,2 3,1 3,4 3,6 Advanced Economies 2,1 1,6 1,8 1,8 Emerging Markets and developing countries 4,0 4,2 4,6 4,8 3.8 GLOBAL GDP (Annual % Change) Latin America and the Caribbean 0,0-0,6 1,6 2, * 2017* 2018* Source: World Economics Outlook, oct 2016, IMF and Peru s Inflation Report, Sep * Forecast. 3

4 Peru was the country with the fastest recovery and highest growth among the main emerging market economies 175 GDP of selected economies (Index 2007=100) Peru: 164,1 155 Emerging market and developing economies 5,7 5,3 Latin America and the Caribbean 2,6 2,4 Peru 6,2 5,2 Emerging: 162,8 135 LATAM: 122, * 2017* Emerging market and developing economies Latin America and the Caribbean Peru Source: World Economics Outlook, oct 2016, IMF and Peru s Inflation Report, Sep * Forecast. 4

5 China India Indonesia Peru Poland Philippines Taiwan Colombia Malaysia Korea Chile Turkey Thailand Russia Egypt Czech Republic Brazil South Africa Hungary Mexico Qatar Greece UAE In the last 10 years, Peru s growth ranks fourth among emerging economies 9.1 Average GDP per capita growth: / (%) / Emerging countries with a GDP higher than US $ 150 billion. Source: IMF, World Economic Outlook and BCRP 5

6 Peru is the country with the highest growth among the main Latin American countries. Latin America: Evolution of GDP (Seasonally adjusted data, 1Q.15=100) [NOMBRE DE LA SERIE]: [VALOR] [NOMBRE DE LA SERIE]: [VALOR] [NOMBRE DE LA SERIE]: [VALOR] [NOMBRE DE LA SERIE]: [VALOR] Brazil: [VALOR] 92 1Q.15 2Q.15 3Q.15 4Q.15 1Q.16 2Q.16 Source: Peru s Inflation Report, Sep

7 Economic activity in the region is expected to recover next year in a context of stable commodity prices. Peru is likely to achieve the highest growth in 2016 and Latin America: GDP Growth (% change) 2017 Peru 4.0 Peru 4.5 Bolivia 3.8 Bolivia 3.7 Paraguay Colombia Mexico Chile Uruguay Argentina Ecuador Brazil Venezuela Argentina Paraguay Colombia Mexico Chile Uruguay Brazil Ecuador Venezuela Source: Latin America Consensus Forecast (September, 2016) and BCRP (Peru). 7

8 Content 1. Slow Global Recovery 5. Gradual withdrawal of Monetary Stimulus 2. Reversal in Peru s external accounts 4. Lower Fiscal Deficit 3. Growth in line with potential output

9 Commodity prices began to fall in However, the stabilization of export prices is expected to have a positive impact on Peru s external accounts from TERMS OF TRADE: Positive Variation Episodes (YoY%) Episode Years TERMS OF TRADE: Negative Variation Episodes (YoY%) Episode Years * 5 TERMS OF TRADE (YoY%) * Terms of trade -2,6-2,2 Export prices -2,3-4,8 Import prices 0,2-2,6 * Forecast. Export price index (annual average, 2007= 100) Commodities Boom Commodities Fall Commodities Stabilization * 100 9

10 Export volumes will be boosted by higher cooper production PERU: CASH COST OF MAIN MINING UNITS IN OPERATION Company 2015 COPPER US$/lb Toromocho 0,684 Constancia 1,150 Antamina 0,900 Las Bambas 1,100 Antapaccay 0,800 Southern 1,120 Cerro Verde 1,150 Quellaveco 1,000 Source: Companies' reports COPPER PRODUCTION (millions of tons) CASH COST OF MAIN MINING UNITS IN OPERATION AND DEVELOPMENT Company Country 2015 COPPER US$/lb Codelco Chile 1,4 Yamana Gold (2016 IIQ) Canada 1,8 Source: Companies' Reports * 2017* 2018* * Forecast 10

11 Agricultural exports have increased considerably, at average annual rate of 9,7 percent. PERU: NON-TRADITIONAL EXPORTS (Average % change ) 46 Average % change Non-traditional exports 9, Fresh grapes Fresh Calcium asparagaus phosphates Fresh avocados Wire of refined copper Frozen squid Fresh mangoes Zinc not alloyed Cocoa beans Canned squid Flexible films Organic bananas Shrimp feed Canned asparagus 11

12 Since 2002, agricultural exports have increased by 17,9 percent in average. Exports: Grapes (US$ million) 700 Exports: Fresh Asparagus (US$ million) Exports: Avocados (US$ million) 305 Exports: Mangos (US$ million)

13 Reversal of trade deficit since Trade Balance (US$ Millions) 9,224 (YoY %) * * 6,060 6,988 6,393 Exports Volume 3,1 1,1 4,7 Imports Volume 7,1 0,0 3,5 Exports Prices 7,9-8,2 2,4 Imports Prices 2,3-3,5 2, , , * 2017* 2018* * Forecast 13

14 The reduction in the current account deficit strengthens the long-term sustainability of the balance of payments. 7.0 CURRENT ACCOUNT AND LONG-TERM EXTERNAL FINANCING OF THE PRIVATE SECTOR: / (%GDP) * 2017* Current Account Long-term external financing of the private sector 1/ Includes net foreign investments, portfolio investment, and private sector s long-term disbursement. *Forecast 14

15 Content 1. Slow Global Recovery 5. Gradual withdrawal of Monetary Stimulus 2. Reversal in Peru s external accounts 4. Lower Fiscal Deficit 3. Growth in line with potential output

16 The growth forecast for 2017 (4,5%) is based mainly on the performance of the primary sectors. 16

17 The growth forecast for 2017 is 4.5%. On the expenditure side, this is expected to be driven mainly by private consumption and investment. 17

18 Recovery of private consumption strengthens domestic demand. Private Consumption (yoy %) * 2017* 18

19 Consumer optimism high relative to previous years. Consumer Confidence Index Households economic situation 70 Optimistic Pessimistic 40 Sep/13 Dec/13 Mar/14 Jun/14 Sep/14 Dec/14 Mar/15 Jun/15 Sep/15 Dec/15 Mar/16 Jun/16 Sep/16 Source: APOYO 19

20 Gradual recovery of household income 8.0 Real income of total employed labor (12-month % change-quarterly moving) Feb/13 May/13 Aug/13 Nov/13 Feb/14 May/14 Aug/14 Nov/14 Feb/15 May/15 Aug/15 Nov/15 Feb/16 May/16 Aug/16 20

21 Fall of private investment due to the completion of some mining projects. Nonmining investment is expected to be driven mainly by projects in sectors such as transportation, communications, and electricity. Private Investment (Real % change) Mining Non-Mining Private Investment * 2017* * Forecast. 21

22 The improvement of investor optimism will be key to investment growth. Investor Confidence Index (Average) * APOYO BCRP Source: APOYO and BCRP * August 22

23 Peru has one of the highest investment rates in the region. Total investment: 2015 (% of GDP) Argentina Brazil Latin America Chile Mexico Peru Colombia Source: FMI - WEO October

24 Measures on the supply side are needed to boost economic growth. Potential GDP growth sources (% change) 6,7 Investment 5,0 5,0 4,0 4,0 Productivity * * Forecast Labor Capital Productivity POTENTIAL GDP LABOR CAPITAL PRODUCTIVITY ,0 1,5 0,9 2, ,7 1,2 2,8 2, ,0 0,8 4,1 0, ,0 0,6 3,3 0,1 2016* 4,0 0,6 2,8 0,6 24

25 Content 1. Slow Global Recovery 5. Gradual withdrawal of Monetary Stimulus 2. Reversal in Peru s external accounts 4. Lower Fiscal Deficit 3. Growth in line with potential output

26 Moderation of the expansionary fiscal stance. ECONOMIC BALANCE OF THE NON-FINANCIAL PUBLIC SECTOR: (% GDP) * 2017* 2018* * Forecast 26

27 Peru has a relatively low public debt. Gross Public Debt 2005 (% GDP) Gross Public Debt 2015 (% GDP) EAU Chile Russia Qatar Korea Czech Republic South Africa China Taiwan Colombia Mexico Peru Malaysia Indonesia Thailand Poland Turkey Philippines Hungary Brazil India Greece Egypt Russia Chile United Arab Emirates 4 Peru Indonesia Turkey Philippines Taiwan Korea Qatar Czech Republic China Thailand South Africa Colombia Poland Mexico Malaysia India Brazil Hungary Egypt Greece Source: World Economic Outlook (October 2016) and BCRP 27

28 In 2015 the net public debt amounted to 6.6 percent of GDP, considerably below the debt burden of other Latin American countries. LATAM: NET DEBT IN 2015 (% GDP) Mexico Costa Rica* Colombia Brazil Panama Uruguay Bolivia Peru Chile -3.5 Source: World Economic Outlook (October 2016), IMF and BCRP (Peru). 28

29 Content 1. Slow Global Recovery 5. Gradual withdrawal of Monetary Stimulus 2. Reversal in Peru s external accounts 4. Lower Fiscal Deficit 3. Growth in line with potential output

30 Average inflation in Peru has been the lowest in the region during the last 15 years. Average Inflation: (%) Brazil Colombia Mexico Chile Peru Peru* Source: OECD * Excludes food and energy 30

31 Inflation is expected to remain one of the lowest in the region Inflation (Dec./Dec.) 2017 Ecuador 2.2 Peru 2.0 Peru 2.8 Ecuador 2.8 Mexico 3.2 Chile 3.0 Chile 3.4 Mexico 3.4 Bolivia 4.0 Bolivia 4.0 Paraguay 4.0 Colombia 4.1 Colombia 6.5 Paraguay 4.5 Brazil 7.3 Brazil 5.3 Uruguay 9.7 Uruguay 8.6 Argentina 39.6 Argentina 20.5 Venezuela Venezuela Source: Consensus Forecast Latin America (September, 2016) and BCRP (Peru). 31

32 Feb/08 May/08 Aug/08 Nov/08 Feb/09 May/09 Aug/09 Nov/09 Feb/10 May/10 Aug/10 Nov/10 Feb/11 May/11 Aug/11 Nov/11 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 Nov/15 Feb/16 May/16 Aug/16 Peru: Gradual reversal of monetary stimulus. Nominal and real* reference interest rate (%) Nominal reference rate Ex ante real reference rate * Ex ante: takes into account expected inflation 32

33 jan-04 may-04 sep-04 jan-05 may-05 sep-05 jan-06 may-06 sep-06 jan-07 may-07 sep-07 jan-08 may-08 sep-08 jan-09 may-09 sep-09 jan-10 may-10 sep-10 jan-11 may-11 sep-11 jan-12 may-12 sep-12 jan-13 may-13 sep-13 jan-14 may-14 sep-14 jan-15 may-15 sep-15 jan-16 may-16 sep-16 In September inflation expectations declined again. 5.0 Inflation Expectations 12 Months Ahead* (%) [VALOR] Maximum Inflation target range Minimum 0.0 * Average of the expectations of financial and economic analysts. 33

34 Credit dollarization has dropped by more than half since Dollarization ratio of private sector credit (%) * Source: BCRP * As of August 34

35 Total credit to the private sector grew 6,2 percent in August. CREDIT TO THE PRIVATE SECTOR (% change) 40.0 Soles US$ Total Jan/15Feb/15Mar/15Apr/15May/15Jun/15Jul/15Aug/15Sep/15Oct/15Nov/15Dec/15Jan/16Feb/16Mar/16Apr/16May/16Jun/16Jul/16Aug/16 35

36 Jan/15 Feb/15 Mar/15 Apr/15 May/15 Jun/15 Jul/15 Aug/15 Sep/15 Oct/15 Nov/15 Dec/15 Jan/16 Feb/16 Mar/16 Apr/16 May/16 Jun/16 Jul/16 Aug/16 Sep/16 Oct/16 Exchange rate (soles per dollar) In order to reduce exchange rate volatility, the central bank sold US$ 1,304 million between January and April and bought US$ 2,089 million between June and July Net Purchases (Million US$) Exchange rate (soles per dollar) Depreciation (%) , , , ,7 2016* 785-0, Source: BCRP. * As of October 11th. 36

37 Million US$ Moderation of exchange rate volatility since March. Net Sales of NDF and other FX intervention instruments (BCRP) 12,000 11,000 10,000 October 10 9,000 8,000 7,000 6,000 5,000 4,000 3,000 2,000 1,000 Million US$ dec-15 feb-16 jul-16 aug-16 sep-16 feb-16 sep-16 FX Swaps BCRP-CDR ,000 May/15 Jul/15 Sep/15 Nov/15 Jan/16 Mar/16 May/16 Jul/16 Sep/16 NDF Net Sales Foreign Exchange Instruments of the BCRP 37

38 The central bank carried out a precautionary accumulation of international reserves during the period of high commodity prices and capital inflows NIR INDICATORS As a % of: 2016* GDP 32,5 Short-term external debt 1/ 555 Short-term external debt plus current account déficit 320 1/ Includes short-term debt balance plus redemption (1-year) of private and public sector. 60 NET INTERNATIONAL RESERVES (US$ Billions) * * As of October 11th. 38

39 Taiwan Thailand Czech Republic Peru Malaysia China Russia Hungary Philippines Korea United Arab Emirates Qatar Brazil Poland Colombia Chile India Mexico South Africa Turkey Indonesia Egypt* Greece Peru ranks fourth in the NIR-to-GDP ratio among emerging markets economies 82 International Reserves: 2015 (% GDP) * GDP to Egypt as of 2014 Source: IMF and Bloomberg 39

40 Peru s Fundamentals and Economic Outlook Julio Velarde Governor Central Bank of Peru October 2016