Soaring consumer prices and rising borrowing costs have reduced growth forecasts in Latin America, with developing economies particularly vulnerable to economic volatility.
Peru’s central bank has lowered its growth forecast for 2022 to 3.1% from 3.4% previously, while maintaining its growth estimate of 3.2% next year, said the bank’s president, Julio Velarde, during a presentation.
Velarde cited ongoing mining disputes, in addition to the impact of the Russia-Ukraine war, as the reason for the downward revision to the growth projection.
Protests by indigenous people have disrupted the Peruvian mining sector in recent months, including a 51-day closure of the Las Bambas copper mine of Chinese company MMG Ltd, one of the world’s leading producers of the red metal.
“The other sectors are doing better than we expected in March. What’s down is the mining sector,” Velarde said.
The central bank cut its 2022 growth forecast for the mining sector from 5.9% to 2.9%.
Mr Velarde said he sees mining investment falling by almost 5% this year, and potentially a much bigger drop in 2023.
“If no new projects emerge next year…there will be a contraction in mining investment next year of almost 16 percent.”
The bank’s projections also include a lower fiscal deficit this year, at 1.9% of gross domestic product, compared to 2.5% previously forecast in March, mainly due to higher revenues, Velarde said. .
The bank forecasts annual inflation of 6.4% for 2022 and 2.5% for 2023. In March, the bank said it expected inflation of 3.6% this year.
Annual inflation in May hit 8.09%, its highest level in two dozen years, leading the bank to raise its benchmark interest rate to 5.5% at the start of the month.