Wednesday, August 20, 2008

Peru June GDP Grows At 11.5% Rate

In June, GDP expanded by 11.5%y/y, in line with consensus. This represented an acceleration from the 7.3%y/y seen in May. All sectors presented recovery on the y/y basis with special highlight to commerce (up from 9.6%y/y to 18.9%y/y) and agricultural (up from 3.6%y/y to 10.8%y/y). Peruvian GDP seems to have expanded by something like a seasonally adjusted 1.9% month on month pushing the 3 months average up from -0.2%m/m to +0.8%m/m. In Q2, it looks like GDP rose 1.1% q/q, down from the 2.1% q/q seen in Q1 and the 2.9 q/q in Q4 2007. Accumulated over the last 12months, GDP grew around 9.8% y/y in Q2, up from the 9.1% in Q1 and still above trend GDP of 8.2% y/y.

The 3month average of the unemployment rate ending in July rose from 7.9% to 8.1%. Such dynamics do not reflect seasonal patterns that usually show a drop in the unemployment rate. The employment level rose by a modest 0.9%y/y, down from the 2.0%y/y in June.

Tuesday, August 19, 2008

Peru Debt Status Raised By Moody's

Peru's foreign-currency debt rating was raised to within one level of investment grade by Moody's Investors Service yestreday as the Peruvian government steadily pays down foreign debt. Moody's increased Peru's credit rating to Ba1 from Ba2, bringing it into line with Brazil, Colombia, Panama and Costa Rica. The outlook for the rating is stable, the New York-based company said in a statement. Earlier this year, Fitch Ratings and Standard & Poor's raised Peru to BBB-, the lowest level of investment grade.

Moody's also cited the reduction in the share of dollar- denominated loans and deposits in Peru's banking system. For the first time in more than two decades, dollar deposits account for less than half of all the deposits in the country, Moody's said.

President Alan Garcia has taken advantage of a jump in revenue from metals exports, surging economic growth and the strongest exchange rate in a decade to buy back dollar- denominated bonds. The government aims to reduce its foreign debt to the equivalent of 13 percent of gross domestic product this year from 18.4 percent at the end of 2007. Peru plans to pay down about $1.1 billion of debt ahead of schedule to the World Bank and Inter-American Development Bank this year after paying off close to $1.3 billion of debt in the first quarter.

Peru's economy expanded 10.4 percent in the first half of 2008 after growing 9 percent last year, its fastest pace since 1994.

The average yield gap between Peru's dollar-denominated bonds and U.S. Treasuries narrowed 3 basis points, or 0.03 percentage point, to 2.01 percentage points, according to JPMorgan Chase & Co.'s benchmark emerging-market debt index. Peru's sol rose 0.2 percent to 2.9195 per dollar, from 2.9245 yesterday. Moody's announced the rating increase after the close of Peru's foreign-exchange market.

Saturday, August 9, 2008

Peru Economy Forecast To Grow 9% in 2008

Peru's economy is going to grow faster than previously estimated this year because of surging consumer demand, according to Central Bank General Manager Renzo Rossini. He now expects gross domestic product to expand by 9 percent, up from an earlier bank estimate of 8 percent. Inflation will slow to the bank's annual target of no more than 3 percent by the end of 2009 as prices of imported commodities drop, he said.

``The economy is growing at full speed,'' Rossini said. ``Investment continues to come in and consumers are optimistic. Growth is guaranteed for this year.''

The IMF are currently forecasting 7% growth for Peru in 2008, but as we know all these forecasts are subject to very large margins of error.

Higher global prices for metals, natural gas and fishmeal, coupled with surging investment and domestic demand, have helped fuel Peru's longest economic expansion. Consumer demand jumped 12.3 percent in the first half. Peru's sol weakened for a fourth day, dropping 1.6 percent to 2.8585 per dollar at 12:55 p.m. The currency has gained 4.9 percent this year.

Thursday, August 7, 2008

Peru Central Bank Raises Interest Rates

Peru's central bank raised its overnight rate for the sixth time in less than a year in a bid to slow the fastest inflation since 1998. The bank raised the benchmark rate a quarter-point to 6.25 percent as policy makers seek to bring inflation into their target range of 1-to-3 percent.

Peru's annual inflation rate has more than doubled in less than 12 months and is now almost twice the central bank's target. Central bank President Julio Velarde joins monetary policy makers across Latin America who've pushed rates up in the last year in a bid to tame prices and meet inflation targets.

Monthly inflation of 0.56 percent last month raised Peru's annual rate to 5.8 percent. Since mid-2006, prices for crude oil, wheat, corn and soybeans have gained on global markets, helping fan inflation in Peru, a net importer of the commodities.

Food prices have risen 9.7 percent in the past 12 months. Core inflation was 4.7 percent in the year through July, wile overall consumer prices are up 4.1 percent, the highest rate in the January-through-July period since the 6 percent rise recorded in the first seven months of 1997.

Surging mining and oil tax revenue will enable the government to triple public spending in provinces to 18 billion soles ($6.4 billion) this year from 2005, creating jobs and boosting wages, President Alan Garcia said July 28.

After expanding 9 percent in 2007, Peru's economy grew 10.2 percent in the first half of 2008, according to the Finance Ministry. Peru's gross domestic product last expanded at a faster pace since the second quarter of 1995, when GDP rose 11 percent from the same quarter a year earlier.

The economy will grow 8 percent this year on surging manufacturing, construction and retail sales, according to the central bank. Consumer demand grew 8 percent in the first half, while private investment rose 19 percent.