Business Monitor International


Peru Business Forecast Report

Published 16 December 2014 | Quarterly

  • 47 pages
  • Instant access to your report online and PDF format through your account library
  • Includes 3 free updated quarterly reports
 
$1,195.00
Peru Business Forecast Report

Core Views:

  • The Peruvian economy will expand at lower average rates in the coming years as a decline in metals prices weighs on private investment into mining and results in slower export growth.

  • However, private consumption and public investment will remain relatively resilient in the coming years due to a rising middle class and an extensive infrastructure project pipeline.

Major Forecast Changes:

  • Real GDP growth fell below our expectations in the first three quarters of 2014, driven by weak exports and investment, prompting us to downgrade our growth forecast. We now project real GDP growth of 3.0% in 2014 and 3.7% in 2015, compared with our previous projections of 3.8% and 4.0% for 2014 and 2015 respectively.

Macroeconomic Forecasts (Peru 2012-2015)
Indicator 2012 2013 2014f 2015f
National Sources/BMI
Real GDP growth, % y-o-y 6.0 5.8 3.0 3.7
Nominal GDP, USDbn 192.7 202.3 202.8 209.6
Consumer price inflation, % y-o-y, eop 2.6 2.9 3.1 2.7
Exchange rate PEN/USD, eop 2.55 2.80 2.95 3.00
Budget balance, % of GDP 1.3 0.5 0.3 0.1
Current account balance, % of GDP -3.3 -4.5 -5.2 -5.0

Key Risks To Outlook:

  • Downside Risks To Growth : Slower-than-expected growth in China, especially stemming from the dynamics of a rapidly cooling property market and high domestic debt (see 'Positive GDP Print Masks Lurking Weaknesses', July 16), could weigh further on investment and metals exports in Peru.

Table of Contents

Executive Summary
5
Core Views
5
Major Forecast Changes
5
Key Risks To Outlook
5
Chapter 1: Political Outlook
7
SWOT Analysis
7
BMI Political Risk Index
7
Domestic Politics
8
PNP Increasingly Vulnerable To 2016 Defeat
8
Slowing economic growth will continue to weigh on the popularity of Peruvian President Ollanta Humala in the coming months, leaving
Slowing economic growth will continue to weigh on the popularity of Peruvian President Ollanta Humala in the coming months, leaving
his centre-left Partido Nacionalista Peruano vulnerable to defeat in the 2016 presidential elections
TABLE: Political Overview
8
Long-Term Political Outlook
9
Mining Disputes Main Threat To Stability
9
Peru's long-term political stability is undermined by key structural risks, most prominently associated with mining and hydrocarbons
Peru's long-term political stability is undermined by key structural risks, most prominently associated with mining and hydrocarbons
exploration in the country's Amazon region
Chapter 2: Economic Outlook
13
SWOT Analysis
13
BMI Economic Risk Index
13
Economic Activity
14
Economic Growth To Remain Subdued In 2015
14
Weak metals prices will weigh on investment in Peru in 2015
While loose monetary policy and expansionary fiscal policies will buoy
private consumption, it will not be enough to see headline growth return to the robust 5
TABLE: GDP By Expenditure
14
Monetary Policy
15
BCRP To Maintain Loose Monetary Policy In 2015
15
The Banco Central de Reserva del Per- (BCRP) will keep its reference rate unchanged at 3
The BCRP's main tool
to stimulate lower trending economic growth will continue to be a lowering of the reserves requirement ratio for commercial banks in the
to stimulate lower trending economic growth will continue to be a lowering of the reserves requirement ratio for commercial banks in the
coming months
TABLE: Monetary Policy
16
Fiscal Policy
17
Budget Surplus To Narrow Further On High Spending
17
The Peruvian government-s nominal budget surplus will narrow further in 2015, driven primarily by an uptick in public spending
Indeed,
slowing economic growth and the declining approval rating of President Ollanta Humala will encourage the government to increase both
slowing economic growth and the declining approval rating of President Ollanta Humala will encourage the government to increase both
current and capital spending
TABLE: Fiscal Policy
17
Balance Of Payments
18
Weak Trade Dynamics To Keep Current Account Deficit Wide
18
Unfavourable trade dynamics will keep Peru's current account deficit near its largest levels over the past decade in 2015
An ongoing
contraction in mining exports, amid falling industrial metals prices and slowing Chinese demand will be the main driver of another large
contraction in mining exports, amid falling industrial metals prices and slowing Chinese demand will be the main driver of another large
trade shortfall in 2015
TABLE: Current Account
19
Currency Forecast
20
PEN: Record Trade Deficit To Drive Depreciation
20
The Peruvian sol will continue its depreciatory trajectory in the coming quarters, driven by weakening trade dynamics and a
The Peruvian sol will continue its depreciatory trajectory in the coming quarters, driven by weakening trade dynamics and a
strengthening US dollar
Intervention by the Banco Central de Reserva del Per- will curb the magnitude of currency weakness, but the
depreciatory direction of the unit will remain in place
TABLE: CURENCY FORECAST
20
Business Monitor International Ltd www
com 3
Contents
Contents
Regional Private Consumption Outlook
22
No Major Upside In 2015
22
Real private consumption growth in most of Latin America will trend lower in the next few years, driven by currency weakness and
Real private consumption growth in most of Latin America will trend lower in the next few years, driven by currency weakness and
unfavourable labour market dynamics
Mexico and Colombia are the only two major economies in which we expect faster average real
private consumption growth over the next three years
TABLE: Brazil - Private Consumption Indicators
22
TABLE: Mexico - Private Consumption Indicators
22
TABLE: Andean - Private Consumption Indicators
23
TABLE: Southern Cone - Pri vate Consumption Indicators
23
TABLE: Central America - Private Consumption Indicators
24
Chapter 3: 10-Year Forecast
27
The Peruvian Economy To 2023
27
Cooling Growth Ahead
27
Economic growth in Peru will cool to an average growth rate of 4
6% between 2015 and 2024, as a slowdown in Chinese economic
growth dampens metals demand and prices in the short term, while fixed investment and private consumption growth moderate from
growth dampens metals demand and prices in the short term, while fixed investment and private consumption growth moderate from
their recent highs
TABLE: Long-Term Macroeconomic Forecasts
27
Chapter 4: Operational Risk
29
SWOT Analysis
29
Operational Risk Index
29
Operational Risk
30
TABLE: Operational Risk
30
Transport Network
31
TABLE: Latin America - Transport Network Risks
31
Economic Openness
34
TABLE: Latin America - Economic Openness Risk
34
TABLE: Imports By Product, 2007-2012
35
Chapter 5: Key Sectors
39
Oil & Gas
39
TABLE: Oil Production
40
TABLE: Oil Production
40
TABLE: Gas Production
41
TABLE: Gas Production
41
Water
42
TABLE: Water Extraction, 2012-2018
44
TABLE: Water Consumption, 2012-2018
44
Other Key Sectors
47
TABLE: Pharma Sector Key Indicators
47
Table: Telecoms Sector Key Indicators
47
Table: Infrastructure Sector Key Indicators
47
TABLE: Food and Drink Sector Key Indicators
48
TABLE: Autos Sector Key Indicators
48
TABLE: Freight Key Indicators
48
Chapter 6: BMI Global Assumptions
49
Global Outlook
49
Warning Signs Growing
49
Table: Global Assumptions
49
TABLE: Developed States , Real GDP Growth , %
50
TABLE: BMI VERSUS BLOOMBERG CONSENSUS REAL GDP GROWTH FORECASTS, %
50
TABLE: Emerging Markets , Real GDP Growth , %
51

The Peru Business Forecast Report helps businesses with market assessment, strategic planning and decision making to promote growth and profitability in Peru and is an essential tool for CEOs, Chairmen, Finance Directors/CFOs, Managing Directors, Marketing/Sales Directors with commercial interests in this emerging market.

An influential new analysis of Peru's economic, political and financial prospects through end-2018, just published by award-winning forecasters, Business Monitor International (BMI).

Key Uses

  • Forecast the pace and stability of Peru's economic and industry growth through end-2018.
  • Identify and evaluate adverse political and economic trends, to facilitate risk mitigation.
  • Assess the critical shortcomings of the business environment that pose hidden barriers and costs to corporate profitability.
  • Contextualise Peru's country risks against regional peers using BMI's country comparative Risk Rankings system.
  • Evaluate external threats to doing business in Peru, including currency volatility, the commodity price boom and protectionist policies.

The Peru Business Forecast Report by Business Monitor International (BMI) includes four major sections: Economic Outlook, Political Outlook, Business Environment and Key Sector Outlook.

Economic Outlook:

How will the Peru economic policy-making and performance impact on corporate profitability over 2014-2018?

BMI provides our fully independent 5-year forecasts for Peru through end-2018 for more than 50 economic and key industry indicators. We evaluate growth, and also forecast the impact of economic management.

Economic Outlook Contents

The Peru Business Forecast Report features BMI's forecasts with supporting analysis for 2014 through to end-2018, set against government views and BMI's evaluation of global and regional prospects.

Key Areas Covered:

Data:

  • Full 10-year forecasts with data - for key macroeconomic variables including GDP (real growth and per capita), population, inflation, current account balance and the exchange rate.
  • BMI's comprehensive Risk Rankings system - rates each country worldwide for economic and political risk, and rates the business environment, within a global and regional context.

Written Analysis:

  • Economic Activity - real GDP growth, employment, inflation, consumption (retail sales and confidence).
  • Balance of Payments - trade and investment, current and capital account.
  • Monetary Policy - interest rate trends (bank lending and deposit rates) and inflation (producer price and consumer price).
  • Exchange Rate Policy - currency controls, foreign investment flows, exchange rates and foreign exchange reserves.
  • Fiscal Policy - macroeconomic strategy and policies, government finance and tax reforms.
  • Foreign Direct Investment - approvals, inflows and climate.
  • External Debt - debt profile (short and long-term plus public and private sector exposure).
  • Global Assumptions - forecasts for each year to end-2018 covering: major commodities, growth in key regions, inflation, and interest and exchange rates, in the United States, Japan, China and the eurozone.

Key Benefits

  • Rely upon BMI's 100% independent forecast scenarios for Peru and underlying assumptions - we take no advertising and are privately-owned.
  • Exploit the benefits of BMI's comprehensive and reliable macroeconomic database on Peru, sourced and fully maintained by BMI from an extensive network of private sector, government and multilateral contacts.
  • Gain key insights into the current and future direction of government economic policy, which could significantly affect your company's business prospects, from BMI's team of analysts and economists.

Political Outlook:

What are the political risks to doing business in Peru over the next 5-years?

BMI's Peru country Risk Rankings evaluate the short- and medium-term threats to political stability.

Political Outlook Contents

  • SWOT Analysis for the Peru Market - Political Strengths, Weaknesses, Opportunities and Threats facing Peru.
  • Political Stability and Risk Assessment - BMI's Risk Rankings assess explicit short- and long-term risks to political stability; latest ankings, rankings and trends for Peru's risk are compared with regional and global averages.
  • Current Administration and Policy-making BMI assesses the threats to the continuity of economic policy, and likely changes to the business operating environment.

Key Benefits

  • Benchmark Peru's risk profile against its neighbours, the global and regional average, allowing easy comparison of risks between key business markets.
  • Identify, evaluate and anticipate political and security risks to the business environment, and to your company's current operations and future plans.
  • Gain valuable insights into government and policy-making, through BMI's specialist team of analysts and economists, and their network of private and public sector sources.

Business Environment

Business Environment Risk Rankings with SWOT Analysis - Business Environment Risk Rankings for Peru, benchmarked against rankings for regional neighbours.

Country Competitiveness - Competitiveness of Peru's business operating environment in supporting corporate growth and profitability, compared with regional neighbours.

Business Environment Contents

  • Domestic Environment - Transparency, cronyism and corruption; labour market flexibility; corporate tax burden; interest rate levels; sophistication of banking sector and stock market; levels of business confidence; infrastructure and IT.
  • Foreign Direct Investment - Analysis of foreign investment regime; foreign ownership laws; attractiveness of business environment to foreign investors.
  • Foreign Trade - Analysis of trading environment, government trade policy, liberalisation measures, tariffs and membership of trade areas.

Key Benefits

  • Assess your company's evolving exposure to country specific operational and business risks, using BMI's in-depth analysis of the legal and regulatory business environment.
  • Understand your market's comparative strengths and weaknesses in the key areas of commercial infrastructure and business institutions, using BMI's proprietary global Business Environment Risk Rankings.

Key Sector Outlook

Which industry sectors in Peru will grow fastest, and where are the major investment opportunities in the market?

BMI's identifies investment opportunities in Peru's high growth industries including automotives, defence & security, food & drink, freight transport, infrastructure, oil & gas, pharmaceuticals & healthcare and telecommunications & IT.

Key Areas Covered:

  • Market Overview - Size and value of each industry with developments over 2009-2013, covering major industry key performance indicators (KPIs) that have impacted company performance.
  • 5-year Industry Forecasts - Forecasts for each year over 2014-2018, using BMI's proprietary industry modeling technique, which incorporates all key domestic and international indicators - including economic growth, interest rates, exchange rate outlook, commodity prices and demographic trends - to provide fully integrated forecasts across, and within, each industry.
  • Demand- and Supply-Side Data/Forecasts - BMI's industry data covers both the output of each industry and the domestic demand, offering clear analysis of anticipated import/export trends, as well as capacity growth within each industry.

Key Benefits

  • Target strategic opportunities in high growth industries, which are benefiting from global mega trends, and thus offer strong investment and growth opportunities.
  • Compare the growth path of different industries to identify which are best placed to benefit from domestic and international economic prospects, and which have historically suffered from volatile growth trends - a key indicator of future risks.

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Testimonials

The sections that I find most interesting and useful are the macroeconomic data and forecasts for the country, top export destinations and economic activity. The indicators/analysis of these areas helps us orient our thinking, our assumptions and, consequently, our decisions in the commercial area.

Country Manager, DHL Express