Challenges and economic projections in Peru: Analysis of the BCR's Inflation Report.

This Friday, June 21st, the Central Reserve Bank of Peru (BCR) will present its Inflation Report, a key document that reviews the country's macroeconomic trends, especially regarding inflation and monetary policy. Leading up to this report, various financial institutions have adjusted their economic projections, anticipating possible changes in the Peruvian economic landscape. Among these institutions are the Banco de Crédito del Perú (BCP), the Peruvian Institute of Economics (IPE), and BBVA. During the presentation of the BCP's Quarterly Economic Studies Report, the Manager of the Economic Studies Area, Carlos Prieto, expressed concern about the possibility of credit rating agencies downgrading Peru's credit rating to the minimum investment grade. Prieto pointed out that actions such as congressional spending initiatives, tax benefits, and the situation of Petro-Perú could contribute to this situation, resulting in higher interest rates and difficulties in financing the fiscal deficit and corporate investments. Despite these warnings, the BCP projects a reduction in the fiscal deficit by the end of the year, relying on the recovery of non-primary sectors and the strength of copper and gold export prices. According to the BCP, this will help maintain an economic growth of 3% for 2024. Additionally, the IPE raised its growth projection to 2.4% for the same year, highlighting the role of domestic demand and the recovery of sectors such as construction and commerce. On the other hand, BBVA revised its growth estimate for 2024 upwards, from 2.7% to 2.9%. Hugo Perea, the bank's chief economist, attributed this revision mainly to the expected positive impact of pension fund withdrawals on the economy. Sectors such as agriculture and fishing have contributed to economic growth in the early months of the year, according to BBVA's report, which highlights significant progress in public investment. However, the projections for 2025 are more moderate due to an expected reduction in the impact of pension fund withdrawals. Despite favorable expectations for the second quarter, there are warnings about possible setbacks in economic growth due to factors such as the normalization of weather conditions and uncertainty both locally and internationally. In general terms, financial institutions agree on forecasting economic growth for the current year, driven by specific sectors and countercyclical measures. Although there are discrepancies regarding the underlying causes of this growth and long-term expectations, the importance of variables such as public and private investment is emphasized, as well as the evolution of key sectors such as agriculture. The inherent uncertainty of the global economy and internal factors pose challenges that will require monitoring and possibly adjustments in economic projections in the coming quarters.