Peru central bank cuts growth forecast for 2021, sees tailwinds from rising copper price

Operations at Constancia copper mine. (Image courtesy of Hudbay Minerals.)

Peru’s central bank on Friday cut its projections for GDP growth in 2021 to 10.7%, from 11.5% previously, as a second wave of coronavirus infections tempers a fast rebound in the world’s No.2 copper producer.

The bank reduced expectations for growth in the key mining sector to 11% in 2021, down from an earlier prediction for a 14.4% expansion.

Peru is set to hold presidential and congressional elections on April 11

Mineral shipments represent 60% of all exports from Peru. In that context, a soaring copper price could bode well, bank president Julio Velarde said, but in the near-term would be tempered by the lingering economic impacts of the pandemic.

“The international winds are in favor of a rapid recovery of the Peruvian economy,” Velarde said. “Better mineral prices would introduce an upward bias in terms of growth.”

The bank forecasts that Peru will post a record trade surplus of $14.48 billion in 2021, compared with $7.75 billion last year.

Velarde said he expects the surplus to continue to grow into 2022 as mining exports normalize and coronavirus infections slow.

Peru is set to hold presidential and congressional elections on April 11. The eventual winner, who will take office on June 28, will likely face a far more encouraging panorama than the current administration, Velarde added.

“Really, if the new president does things well, they will find a scenario in which the economy will see sustained growth for a long time,” he said.

Velarde said the bank now expects Peru’s economy to grow 4.5% in 2022, slightly up from its previous prediction of 4.0%.

(By Marco Aquino and Dave Sherwood; Editing by Rosalba O’Brien)


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