Centrist parties hit by accusations; economy enters recession; BCRP to cut rates in October
In this report, we offer an update on the Peruvian political scene; on the country’s economic performance; and on the timing of the first Central Bank rate cut. We argue that, while political risk has eased, President Dina Boluarte remains isolated and unpopular. The political capital of the two centrist parties in Congress has also been depleted.
Real GDP in Q2 posted its second y/y drop and, while we expect a rebound in H2, this is likely to be more modest than the authorities suggest. Investors will be looking to the release, prior to the end of August, of the 2024‒2027 Marco Macroeconómico Multianual (the multiannual macroeconomic framework, or MMM) and the 2024 draft budget. Finally, we have tweaked our BCRP forecast, and now expect its first cut in October, and the rate ending 2023 at 7%, 2024 at 5% and 2025 at 3.5%.
The July 19th protests were less disruptive than those in January, with a smaller turnout, no attacks on state property and the police largely managing to avoid clashes with protesters. Unlike in January, when the south was isolated and the economy came to a standstill, only a few nationwide roadblocks were reported.
Most recent polls indicate that public concerns have focused on the economic crisis, internal security and corruption. The pressure on Boluarte to resign has eased, and the movement to reinstate former president Pedro Castillo has all but evaporated.
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