Kurt Burneo lowered GDP growth forecast for this year from 3.6% to 2.2%

The new Minister of Economy and Finance (MEF), Kurt Burneo, made a significant reduction in the projection of GDP growth for this year, from 3.6% to 2.2%.

It should be remembered that until three weeks ago, the previous economy minister, Óscar Graham, had estimated that the economy would grow 3.6% this year. The new MEF estimate will be made official in the Multiannual Macroeconomic Framework, which will be published at the end of the month.

Kurt Burneo said that the fight against the slowdown in the economy is one of the reasons why he agreed to lead the MEF portfolio.

“You see situations where things can definitely be done better. And I’m not criticizing Óscar Graham, but given the context we’re in, it’s not happening like it used to, where politics and economics went their separate ways; Unfortunately, the ropes are now beginning to intertwine, and it turns out that political instability is beginning to spread adversely to the economy,” Burneo said today on RPP.

“I feel that there is a possibility that things can be handled better, financially., taking distance from the political part, to promote a growth rate higher than the current forecast of 2.2%; until recently the projection was at 3.6%”, remarked Burneo.

“Then for me it is clear that if the economy does not take a turn, the demand for employment is going to grow little. We are clear that the economy should grow at least 5% to absorb the almost 300,000 young people who enter the labor market every year; if we do not manage to stop the economy from improving its growth, there will be difficulties for employment and for young people”, she underlined.

Last night, after taking the oath of office, Burneo was consulted by the press about the differences that there would be in his management with respect to his predecessor. The minister pointed out that one of them will be to generate greater confidence in economic agents. And he also made reference to the GDP projection for this year.

“The fundamental difference (with my predecessor) is that we have to restore the confidence of economic agents. The need for less uncertainty is to give clear signals of economic policy, at least in the short term, to achieve a growth rate higher than the 2.2% projected for this year,” Burneo said last night.

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The latest projection of the Central Reserve Bank (BCR), made in June, estimates that the GDP will grow 3.1% this year.

While economic analysts, surveyed by the BCR in July, project that the GDP would grow 2.7% this 2022. Financial companies are more pessimistic, with an estimate of 2.5%.

Likewise, according to the latest Consensus Forecast LatinFocus report of July 2022, the consensus of analysts projects a growth of 2.7% for Peru in 2022, with a minimum of 1.4% (see table).

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“We need to harmonize monetary policy with fiscal policy”

Minister Burneo also warned that the rise in the BCR’s reference interest rate, although it seeks to control inflation, is also affecting the economic dynamics, for which he will seek a meeting with the BCR authorities.

“Why is the economy slowing down? At that point I think we should have a conversation with the BCR, because what it is doing is raising the interest rate month after month, which is making credit more expensive and, therefore, slowing down consumption and investment”, noted in RPP.

“The rise in interest rates slows down the effort to reactivate the economy. I think we could talk with the Central Bank. We need to harmonize the monetary policy of the BCR, with the fiscal, in charge of the MEF. Talk not only with Julio (Velarde), but with the BCR board, because I understand that it is handled as a collegiate”, Burneo noted.

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