April rebound quashes slowdown fears for Peru, says Velarde
Brandishing fresh April growth numbers, Peru's central bank governor sought Wednesday to allay fears of an economic slowdown.
Peru's central bank governor sought Wednesday to allay fears
of a slowdown with fresh data showing an economic rebound in
Speaking at LatinFinance's Andean Forum, Julio
Velarde said the economy grew by 7.4% in April – the
fastest monthly expansion this year.
He said the economy was on track to expand by 6.5% in 2013,
adding that the numbers were evidence of solid demand for the
The news will come as a relief to investors and policymakers
anxious at a paltry 4.8% expansion in the first quarter.
Velarde said apparently weak first quarter numbers compared
to a year earlier were due in part to fewer work days in the
first three months of the year – a fact that meant the
economy in fact expanded by 6.2% in the period.
His comments came a day after finance minister Luis Miguel Castilla told
LatinFinance's Andean Forum the government would press
ahead with measures to prevent the economy from slumping in the
face of headwinds. The finance ministry has forecast growth
between 6% and 6.3% this year.
Major role for mining
|| Julio Velarde, Peruvian Central Bank
Velarde said that investment as a percentage of GDP would be
close to 30% by 2016 and that the mining and oil and gas
sectors, which are crucial to the country's long-term growth,
would play a major role in the coming years. The minerals
sector was likely to expand by 11.3% until 2016, he said.
President Ollanta Humala's administration expects mining
investment to top $50 billion by the end of the decade, while
energy investment will be above $20 billion.
A number of major projects – including Glencore
Xstrata's Las Bambas, Chinalco's Toromocho and the expansion of
Freeport McMoRan Gold and Copper's Cerro Verde mine –
will double Peru's copper output by 2016.
The metal remains Peru's top export and minerals account for
60% of its $45 billion in exports.
Analysts, including a number of experts at the
LatinFinance forum, expect copper prices to remain
mostly stable for the coming years as a result of slow global
recuperation and continued demand by China.
Velarde said the strong participation of mining and oil and
gas "should contribute to average growth of 6.5%
Resistant to external moves
Peru's international reserves, approximately $66 billion,
and the structure of its debt would help the economy weather
adverse external events, including an earlier than expected
unwinding of quantitative easing by the US Federal Reserve,
"We do not believe that the changes on the way [by the Fed]
are going to be very profound in our case," said Velarde.
Velarde and Castilla both said that the quick depreciation
of the sol at the end of May, in wake of
the Fed's comments on monetary policy, represented a
temporary correction and that volatility would prove
Velarde said Peru's international reserves were equivalent
to 32.7% of GDP, the highest in the region, followed by Chile
He also cited the positive effect of debt re-profiling in
Peru now has a higher percentage of locally-denominated debt
than any other emerging market, he noted. Bonds in
soles represented 55% of the total at the end of 2012.
Malaysia ranks second globally, with 42% of its debt in local
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