Peru: Economic and Social Outlook

Transcription

1 Peru: Economic and Social Outlook Luis Miguel Castilla Minister of Economy and Finance January, 1

2 Peru Key Investment Highlights Outstanding economic perspectives Highest growth in the region with moderated inflation Economic dynamism across sectors Baa3 / Baa3 (1) Positive outlook Reduced unemployment and poverty Exports at record levels and increasing its diversification BBB / BBB+ Stable outlook Sound fiscal position allows countercyclical policy Healthy external debt levels BBB / BBB+ Stable outlook (1) Foreign Currency rating / Local Currency rating

3 Sound Macroeconomic Performance

4 P.R. China India Tajikistan Kazakhstan Vietnam Panama Singapore Peru Sri Lanka United Arab Emirates Bangladesh Kuwait Ghana Malawi Zambia Dominican Republic Indonesia Argentina Albania Egypt Malaysia Philippines Moldova Pakistan Niger Turkey Libya Mali Russia Morocco Costa Rica Thailand Tunisia Botswana Hong Kong Colombia Ecuador Paraguay Honduras Poland Republic of Korea Uruguay Lithuania Bolivia Bulgaria Mauritania Serbia Kenya Romania Algeria Brazil Nepal Bosnia and Chile Ukraine Montenegro Belize Saudi Arabia South Africa Israel Estonia Guatemala Czech Republic Burundi Latvia Yugoslav Australia Luxembourg Venezuela Nicaragua Slovenia Croatia New Zealand Greece Ireland Sweden Iceland El Salvador Mexico Spain Canada Finland United States Switzerland Hungary Austria Norway Dominica United Kingdom Netherlands France The Bahamas Germany Japan Jamaica Denmark Portugal Haiti Italy In recent years, Peru has been among the fastest growing economies in the world World s GDP -1 (Accum. % Change) Peru 73, Argentina 9,9 Colombia Ecuador 46,8 4,9 Brazil Chile 4,3 39, Mexico 18,9 1 Source: IMF. 4

5 Peru achieved the lowest inflation rate of the region between -11 Average Inflation in Latin America ( % ) Tomar periodo Venezuela Argentina Brazil Colombia Mexico Chile Peru 1/ Average inflation of Argentina and Mexico up to November, 11. Source: IMF, Bloomberg.

6 Peru Key Investment Highlights GDP Breakdown by sector GDP Breakdown by sector 1 8% 1% 7% Agriculture and Livestock Fishing 7% % % Agriculture and Livestock Fishing 38% 1% Mining Manufacturing 39% 1% Mining Manufacturing Electricity and Water Electricity and Water % Construction % Construction 14% % Commerce Other Services 1% 7% Commerce Other Services GDP Breakdown per Sector (Annual % change) GDP Breakdown per Sector 1 (Annual % change) Mining 8.4 Construction 17.4 Construction 8.4 Manufacturing 13.6 Manufacturing 7. Commerce 9.7 Other Services 6.4 Electricity and Water 7.7 Commerce 6. Other Services 7.4 Electricity and Water.6 Agriculture and Livestock 4.3 Agriculture and Livestock.4 Mining -.1 Perú 6.8 Perú Source: IMF. 6

7 In 11 Peru grew close to 7% and continues to be one the most dynamic economies of the region Peru: GDP 11 (Annual % change) LATAM: GDP 11 (Annual % change) Q11 Q11 3Q11 Jan-Sep 11 11* Peru Chile Colombia Mexico Venezuela Brazil Nominal GDP accounted for USD 13,919 millions in 1. Cumulative GDP to 3Q11 is around US$ 13,48 million. Source: MEF, IMF, Consensus Forecasts. 7

8 Economic dynamism prevails Electricity Production (Annual % change) Credit to Private Sector (Annual % change) J-1 M-1 S-1 J-11 M-11 S-11 D-11 Construction (annualized % change rolling quarter, seasonally adjusted) , S-1 N-1 E-11 M-11 M-11 J-11 S-11O-11 1 D-9 M-1 J-1 S-1 D-1 M-11 J-11 S-11 D Private Vehicles Imports (Millions of US$) Nuevos Soles Total 16 F-1 M-1 A-1 N-1 F-11 M-11 A-11 N-11 D-11 Source: BCRP, SUNAT. 8

9 And the exchange rate of the Peruvian Nuevo Sol is one of the less volatile currencies in the region Relative volatility of some Latin American currencies (Base: January 3, = 3,9 Nuevos soles/usd) 8, 7, 7, 6, 6,,, 4, 4, 3, 3, Perú Brazil Colombia Chile Mexico 8, 7, 7, 6, 6,,, 4, 4, 3, 3,, , 1 Source: Bloomberg, MEF 9

10 In 11 exports achieved record levels Total Exports (Millions of US$) Trade Balance (Millions of US$), 4, 4, 3, 34,444 4,19 9, 8, 7, 6,,86 6,91 7,9 3,,, 4,, 17,368 3, 1,, 1, 6,9 1,, -1, -43 Jan-Sep 11 11* Jan-Sep 11 11* Preliminary estimates. Source: BCRP. In 11 exports surpassed US$ 4 billion, a historical record. The trade balance reached a surplus of around US$ 8 billion. 1

11 Current account deficit is sustainable Current Account & Financial Account (% of GDP) Net foreign direct investment (Millions of US$) Current account Financial account 1, 9, 8, 7, 6,, , 3,, 1, * * Preliminary estimates. Source: BCRP. 11

12 Solid banking system and low exposure to European banks Solvency indicator of banking 1 (%) Dollarization Ratio (%) Liquidity Credit Prudencial Requirements Banking Law International Standard S-7 F-8 J-8 D-8 M-9 O-9 M-1 A-1 E-11 J-11 N-11 Participation of European Banks in LATAM Financial System (% of bank capital) European Banks as a Share of Total Bank Credit (% of total loans) Mexico Chile Peru 1/ Capital Adequacy Ratio: risk weighted assets and contingent loans to regulatory capital. /. As of November, 11. Source: BCRP, Goldman Sachs. 1 Mexico Chile Peru

13 More decentralized employment Employment in companies with 1 or more employees Main Cities (Accumulated % change Jan-Nov 11/Jan Nov ) Piura Puno Arequipa Trujillo Huancayo Paita Tarapoto Tacna Talara Huaraz Cusco Chiclayo Chincha Ica Pisco Sullana Pucallpa Cajamarca Iquitos Average Grotwh 4% Metropolitan Lima Other Urban Urban Employment (Annual % change) Jan- Nov Source: INEI, MINTRA. 13

14 Increase in adequate employment and income Employment in Metropolitan Lima by type (% of total EAP 1 ) Average Quarterly Income Index (Jan. 7=1) Adequate Employment Underemployment 3 nov-jan7 jun-aug8 jan-mar1 aug-oct Urban Peru Metropolitan Lima 1T7 3T7 1T8 3T8 1T9 3T9 1T1 3T1 1T11 3T11 1/ EAP: Economically Active Population. Source: INEI. 14

15 Peru is an investment-grade Latam country Foreign Country Sovereign Ratings Peru s Foreign Sovereign Rating Local Country Sovereign Ratings Peru s Local Sovereign Rating Source: Standard & Poor s, Fitch, Moody s. 1

16 Peru (Baa3) Mauritius (Baa) Kazakhstan (Baa) Brazil (Baa) Chile (Aa3) Colombia (Baa3) Panama (Baa3) Panama (Baa3) Peru (Baa3) Mauritius (Baa) Chile (Aa3) Brazil (Baa) Kazakhstan (Baa) Colombia (Baa3) Kazakhstan (Baa) Chile (Aa3) Peru (Baa3) Brazil (Baa) Colombia (Baa3) Panama (Baa3) Mauritius (Baa) Solid external accounts and lower external vulnerability versus Baa and Baa3 countries External vulnerability indicator 1 Current account balance 1 (% of GDP) Mauritius (Baa) Peru (Baa3) Panama (Baa3) Brazil (Baa) Colombia (Baa3) Average Baa 6 Average Baa Average Baa Average Baa Kazakhstan (Baa) 94 Chile (Aa3) Official Forex Reserves 1 (% of GDP) Net Foreign Direct Investment 1 (% of GDP) Average Baa3 Average Baa Average Baa Average Baa.1 1/ (Short-Term External Debt + Currently Maturing Long-Term External Debt + Total Nonresident Deposits Over One Year)/Official Foreign Exchange Reserves. Source: Moodys, Central Banks. 16

17 Solid Fiscal Accounts

18 Solid Public Finances and Fiscal Commitment Non-Financial Public Sector Result Total Gross Public Sector Debt (% of GDP) (% of GDP) 4 3, 3,1,3 4, 1, , 9,7 4,1 7,1 6,9,9 1, , - -1, Jan-Sep 11 11* Jan-Sep 11 11* Total External Debt Service (% of exports of goods and services) Fiscal Stabilization Fund 11 (Billions of US$) 6,6,9 1 14, , 9,1 3 3,4 1, Jan-Sep 11 * Preliminary estimates. Source: BCRP, MEF, MMF 1-14 Revised. Dec Set 11 18

19 Chile (Aa3) Kazakhstan (Baa) Peru (Baa3) Colombia (Baa3) Panama (Baa3) Mauritius (Baa) Brazil (Baa) Kazakhstan (Baa) Chile (Aa3) Peru (Baa3) Panama (Baa3) Brazil (Baa) Colombia (Baa3) Mauritius (Baa) Strong fiscal position and better performance than the average Baa and Baa3 countries in a decade Financial Balance 1-1 (% of GDP) Financial Balance 1 (% of GDP) Peru Average Baa Average Baa Average Baa Average Baa Public Debt 1-1 (% of GDP) Public Debt 1 (% of GDP) Average Baa3 Average Baa Peru Average Baa Average Baa Source: Moody s, Central Banks. 19

20 Impact on fiscal revenues of a 3% decline in commodity prices Fiscal Revenues (% of 1 GDP) Colombia Argentina Impact of a 3% fall in commodity prices Peru 1, Chile Ecuador Venezuela Bolivia Trinidad & Tobago Source: IMF Staff estimates

21 Debt profile: exchange and interest rate exposure Public Debt Structure by Currencies (%) September 6 September 11 19,3 1,7 9, USDollar Other Nuevo Sol 46,6 6,6 46,8 Debt denominated in local currency has more than doubled in the last years Public Debt Structure by Interest Rate (%) September 6 September 11 44, 6, Variable Fixed 77,4,6 Source: MEF Sharply decrease in debt attached to variable rates 1

22 Debt profile: amortization payments exposure Public Debt profile by type September 6 September 11 Pressure in amortization payments has been reduced by 4.6% over the past five years. Source: MEF

23 Fiscal policy main guidelines of the new administration 1. To reach a fiscal balance in the structural accounts.. To hold a countercyclical fiscal position. 3. To increase permanent fiscal revenues. 4. To assure a decreasing tendency of the national debt as a percentage of GDP ratio (from 3.4% in 1 to a 17.7% in 14).. A conservative Budget for 1 (surplus of almost % of GDP in 11), but covers main priorities of the government: (i) social inclusion, (ii) human capital, (iii) citizen security, among others. 6. Designing and implementing a Contingency Plan. 3

24 Strategy to increase permanent fiscal revenues Fight against tax evasion. Fight against smuggling and undervaluation. Tax debt recovery. Tax crime and customs fraud detection and effective sanctions. Case for tax payment and custom facilitation. Tax expenditure rationalization. Tax Evasion (%VAT) Tax Burden 1 (% of GDP) ,6 34,7, ,7 14,8 1,8 1, 18, Jan-Sep 11 11* 16* 1/ Central Government Revenues / GDP. Source: SUNAT. 4

25 Sound fiscal position allows to countercyclical policy stance Non-Financial Expenditures and Current Revenues (Annual % Change) Non-Financial Public Sector Overall Balance (% of GDP) ,, Jan-Sep 11 General Government Non-Financial Expenditures General Government Current Revenues 6,1 11* 17, ,3 3,1,3 -, 4,,8-1, Jan-Sep MMF / 1,6 11* Fiscal Stabilization Fund (% of GDP) Public Savings up to September 11 (% of GDP) 3, 3, , Other Deposits, 1, 1,4 1,4 1, ,7,1 Deposits in Private Financial Institutions Subnational Governments Resources (Canon, etc.) 1,,4, Sep 11* * Preliminary estimates. 1/ Multiannual Macroeconomic Framework Revised 1-14 Source: MEF. 4 3,, Public Savings Fiscal Stabilization Fund Demand Deposits and Time Deposits in Central Bank Public Savings accounts 13,1% of GDP

26 Contingency Fiscal Plan Timely, temporary and aggressive. Combines short-run actions (transitory fiscal impulse) and long-run actions (reducing infrastructure gap, improving productivity and potential GDP). Emphasis on poor areas: Infrastructure projects. Infrastructure maintenance. Small and medium enterprise procurement (SMEs). Guarantee Fund for SMEs and non-traditional exporters. Enabling feasibility studies. Temporary Employment Program. Since september 11, precautionary measures have been taken to boost fiscal impulse (1.%-% of GDP). 6

27 Fiscal Impulse in 1 Source: MEF 1,8 1,6 1,4 1, Total Current Non-Financial Expenditures : 6-11 (% of GDP) 1 11,8 11,6 11,4 11, 11 1,3 1,6 1,4 Public Investment will grow above 3% in 1 (after falling 6% in 11). Fiscal Surplus will reach around.8% of GDP in 1. 1,7 11,9 11, Jan-Sep 11 7

28 Social Outlook

29 Peru has grown steadily over the recent years and poverty has been reduced GDP tripled in 1 compared to. Fastest per capita GDP growth since the 19 s. Per Capita GDP levels catching up after 3 lost decades. Poverty has reduced from % to 3% Per Capita GDP (1-yr.-average, % change) Population has grown in the last 1 years at an average rate of 1.6%, and in 1, it reached a total of 9. million persons. Source: BCRP. 9

30 However, the challenge remains to achieve a broad based development and further social inclusion Total Poverty and Extreme Poverty 1: National vs. Rural (% of population) 6 National Rural Total Poverty Extreme Poverty Rural poverty doubles the national average. Source: INEI. 3

31 In the coming years, Peru s main goals are further poverty reduction and social inclusion Variable Base Line 1 Target Poverty 31.3% Poverty less than %. Extreme poverty 9.8% Extreme poverty less than % 3. Child chronic malnutrition 17.9% Child chronic malnutrition less than 1% Source: MEF; ENAHO and ENDES 1 - INEI. 31

32 The government strategy is based on social programs that follow a Life Cycle Approach Public Programs (Millions of Nuevos Soles) SAMU: S/. 4 PAN: S/ Jóvenes a la obra: S/. 34 SMN: S/. 1 4 Cuna Más: S/. 19 PELA Elementary school: S/. 19 PELA Primary school: S/. 4 1 PELA Secondary school: S/. 833 Beca 18: S/. 136 Pensión 6: S/. 41 Maternal mortality Neonatal mortality Chronic malnutrition Infant mortality Cognitive and Emotional development Learning achievements Elementary school Coverage Learning achievements Secondary Coverage Learning achievements No dropout Access to quality higher education Relevant education for the labor market Ensure the basic conditions for subsistence JUNTOS: S/. 8 Millions Pregnancy years 3 years 6 1 years years 17 4 years + 6 years 3

33 The 1 Public Budget reflects the priorities of the Government related to social issues The 1 Public Budget by type of intervention (Millions of Nuevos Soles) Distribution of the 1 Public Budget 1 (%) Expenses Amount Social 3,666 Productive 18,113 Administrative 1,31 Governance and Public Order 1,4 Subtotal 7,11 Debt Service 9,49 Administrative Administrativos 16% Gobernabilidad y orden público 17% Governance Social Sociales 43% 43% Pension Duties 9,37 Contingency Reserve 1,17 Total 9,3 Productivos 4% 4% Productive 1 social sector budget allocation has increased by approximately % with respect to the 11. 1/ Out of debts service, pension duties and contingency reserves. Source: MEF 33

34 Perspectives

35 Per Capita GDP: Upward trend Per Capita GDP (US$ of 11) 6,,, 4, 4, 3, 3,,, 1, 1, Current Average 3 years ,94,9 3

36 Sharp reduction in Per Capita GDP gaps: Peru vs. Other Latam countries PPP Per Capita GDP Gap 1 (Peru=1) 1 1 GDP per capita PPP ($ PPP) 1 11 Var. % Peru,116 1,1 9. Colombia 6,1 1,1 69. Chile 9,939 16, Brazil 7,38 11, Mexico 1,81 1, Mexico Chile Brazil Colombia 1/ Each country s GDP per capita PPP divided by Peru s GDP per capita PPP. Source: IMF-WEO Setember 11 36

37 In 1 Peru is expected to be the economy with the fastest growth and lowest inflation in the region LATAM: GDP 1 (Annual expected % change) LATAM: Inflation 1 (Anual expected % change) Peru Colombia Chile Venezuela Argentina Mexico Brazil Peru Chile Colombia Mexico Brazil Argentina Venezuela.3 Source: MEF, Consensus Forecasts. 37

38 Continue to promote private investment as the engine of growth Announcement of Private Investments Projects in the next 3 years (Billions of US$) Private Investment Projects (Millions of US$) , ,96 7,13,847 3,191 Dec-1 Jun-11 Dec-11 Mining and Hydrocarbons Electricity Industry Infraestructure Other Sectors Source: BCRP. 38

39 Ample growth and investment opportunities Copper Production 1 (Thousands of Fine Metric Tons) Tourist arrivals 1 (Millions of persons) Exports 1 (Billions US$) 6,, 4, 3,, 1, 1,47 Peru, Chile Ecuador Peru Colombia Chile Argentina Agro 3. Peru 8.7 Chile Wood & paper.4 Peru 4.9 Chile Banking System credits Credit 1 (% of of GDP) Vehicle sales per capita 1 (Vehicles per 1 1, inhabitants) Sale surface in department stores (Thousand of sq.mts.) of m) (Sq. (m mts per per inhabitant) Peru Brazil Chile Peru Colombia Ecuador Chile Peru 847 Chile Peru Chile Source: Sunat, UNWTO, Geological Service of USA, AEADE, ARAPER, ASBANC, FELABAN, CAVEM, ASOPARTES, CCL, Ripley FELABAN, SBS, Superinterdency of Banks and Financial Institutions (Chile). 39

40 In conclusion, Peru should continue in the path of growth and social inclusion Per Capita GDP (US$) Total Poverty Rate (% total population) 1, 1, 8, 4 4 6, 3 3 4,, 1 1 1e e 1 1 1e e Source: MEF. 4

41 Peru: Economic and Social Outlook Luis Miguel Castilla Minister of Economy and Finance January, 1