LIMA Peruvian President Pedro Pablo Kuczynski said on Friday that corruption allegations were slowing private investment, although he still expected the country's economy to expand 3 percent to 5 percent this year due to public investment and higher metal prices.
Kuczynski's approval rating fell five percentage points to 38 percent in February as a graft scandal involving Brazilian builder Odebrecht SA [ODBES.UL] ensnares his one-time boss, former President Alejandro Toledo.
"I believe there is a lot of pessimism," Kuczynski said on RPP radio. "The corruption case revolves around contractors. Odebrecht is already being investigated, but there are others, and that makes the projects stop."
Kuczynski, who previously was in Toledo's cabinet, has denied knowing about a $20 million bribe prosecutors say the former president took from Odebrecht. Toledo denies wrongdoing. Peru's government has asked the United States to deport him.
The Finance Ministry slashed Peru's growth outlook to 3.8 percent from 4.8 in January as what it called the "Odebrecht effect" stalled projects.
Kuczynski, however, remained optimistic about growth.
"(Gross domestic product) is not going to fall this year," he said. "The growth rate will be between 3 and 5 percent, and to do this, public investment will have to be reactivated."
Brazil's worst recession ever is blamed in part on the nation's "Car Wash" corruption probe, which centered on Odebrecht and other contractors.
(Reporting by Ursula Scollo; Writing by Caroline Stauffer; Editing by Lisa Von Ahn)