Peru central bank sees lower 2023 growth, drop in mining investment due to protests

By Marco Aquino, Brendan O’Boyle

LIMA (Reuters) -The Central Reserve Bank of Peru forecast lower economic growth this year due to the impacts of months-long social unrest and torrential rains in March, with the bank’s chief saying he expected “zero percent” growth in the first quarter.

A central bank report published on Friday lowered the economic growth projection for 2023 to 2.6% from 2.9% previously.

Peru’s economy contracted in January as nationwide protests left dozens of people dead, upended the movement of people and goods, and hurt commerce.

The unrest impacted business and consumer confidence, said the bank, which sees private investment in the country’s critical mining sector falling 16.7% in 2023.

Peru’s national government announced it would spend billions to revive the economy. The central bank says the government’s investment will exceed the fall in investment by local governments and public companies.

Central bank president Julio Velarde said he expects annual inflation to ease to a rate of 3.0% by December, within the bank’s target range.

The central bank also maintained its estimate for a fiscal deficit of 1.6% of gross domestic product in 2023.

The International Monetary Fund on Thursday projected Peru’s economic growth would slow to 2.4% this year.

The IMF said the main external risks to its outlook include an intensification of spillovers from Russia’s war in Ukraine, an abrupt global slowdown prompting commodity price volatility, and a possible de-anchoring of inflation expectations forcing a further tightening in global financial conditions.

However, Peru’s “very strong policy frameworks and macroeconomic buffers,” the IMF added, “will help shield the economy from downside risks.”

(Reporting by Brendan O’Boyle and Marco Aquino; Editing by Sarah Morland)