Lima — As anticipated by the majority of analysts, the Peruvian economy contracted for a second consecutive month in June, capping a slowdown that marked the entirety of the first half of 2023.
According to figures published by the National Institute of Statistics and Informatics (INEI), Peru’s economic activity fell 0.56% in the sixth month of the year, primarily driven by declines in sectors such as fishing, which marked a retreat of 68.93% during the period.
This was compounded by declines in other areas such as manufacturing (-14.64%), financial and insurance (-9.19%), construction (-4.12%), and agriculture (-1.45%).
In contrast, the mining and hydrocarbons sector grew by 15.95% in the month of June, mitigating in part the economy’s overall decline.
According to the INEI statistics bureau, national output during the January-June 2023 period decreased by 0.45%, while over the last twelve months (July 2022-June 2023), an increase of 0.74% was reported.
During the first few months of the year, output was impacted by nationwide social unrest and protests, leading to road blockades and the shutdown of some industries in the central and northern regions of the country. This was compounded by climatic impacts from Cyclone Yaku and El Niño. The negative effects of these supply shocks extended longer than anticipated by official authorities.
The Ministry of Economy and Finance (MEF) had already projected a decline for the Peruvian economy at the end of the second quarter. Following the updated mining figures, Economy Minister head Alex Contreras anticipated a result close to 0% for economic activity in June.
Peru’s central bank (BCR) had forecast a decline between 0.5% and 0.7%. Analysts’ expectations averaged a negative result of -0.7%.
The latest figures reaffirm the negative estimates held by the majority of economic agents for year-end, which have come closer to the projected 1% growth for Peru’s economy in 2023. Officially, the Ministry of Economy had anticipated growth above 2%, but by the end of August, MEF could confirm a forecast closer to 1.5%.
How Did Each Sector Perform?
In the face of ongoing impact of El Niño, the fishing sector sank for a second consecutive month, declining by 68.93% in June, at a similar pace to the drop recorded in May. This was due to reduced extraction of maritime species for both indirect and direct human consumption, as reported by INEI.
Nevertheless, the sharp decline in fishing, combined with setbacks in other sectors was counteracted by growth in the mining sector of 15%, which contributed 1.77 percentage points to the variation in economic activity.
Given its weight in the Peruvian economy, the decline that impacted economic activity the most in June was manufacturing, which subtracted 1.83 percentage points from the month’s result. Manufacturing also experienced a second consecutive month of decline, with a variation of -14.64%, driven by negative performance in both primary and non-primary manufacturing subsectors.
The financial and insurance sector was the second category that weighed down activity with a 9.19% drop in June. This sector has been on the decline since 2021, with the most recent drop coming on the back of decreased loan origination by banks.
Construction was the fourth sector that most affected Peru’s economic performance in June. The 4.12% drop in this sector was amid lower domestic cement consumption linked to the slowdown of private projects.
