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UPDATE 1-Flooding, scandal to slow Peru 2017 growth to 3 pct -finance minister
May 30, 2017 / 10:47 PM / 6 months ago

UPDATE 1-Flooding, scandal to slow Peru 2017 growth to 3 pct -finance minister

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May 30 (Reuters) - Flooding and a wide-ranging corruption scandal will slow Peru’s growth to 3 percent this year, the country’s finance minister said on Tuesday.

Alfredo Thorne, Peru’s minister of finance and economy, said he anticipates growth will rebound quickly, with growth rising to 4.5 percent in 2018 and 5 percent in 2019.

“The weakest part of the (growth) cycle is going to be the last quarter,” Thorne said Tuesday in New York. “I am absolutely convinced we are going to come out of this challenge stronger.”

Before the el nino rainstorm last year and before Brazilian builder Odebrecht acknowledged bribing Peruvian officials over a decade-long period, the government had forecast a 4.8 percent economic expansion for 2017, up from an expected 4 percent last year.

In January, Thorne had predicted growth would be “1 percent” below the 4.8 percent figure.

He reduced that on Tuesday in a presentation to investors and also said that the country had “no plans” to issue more “soberanos,” or local currency debt, but would be launching a Euroclear bond next month.

He said his biggest worry was of growing protectionism in the U.S. and Europe and how that could affect Peru.

Peruvian President Pedro Pablo Kuczynski was working to integrate more tightly with Pacific rim countries, Thorne said, and is working on pushing Colombia and other members of the Pacific Alliance, a trade collective that also includes Mexico, toward a similar pivot.

“There is a very strong view that we may see some backtracking in terms of trade,” Thorne said. “That worries us.”

Thorne and Julio Velarde, the central bank president, both spoke in hopeful terms about an expected strong recovery for Peru in the second half of the year.

“With business confidence being on the optimistic side, we are expecting some push from the fiscal sector and for this to lead investment,” Velarde told Reuters on the sidelines of the event hosted by inPeru at Bloomberg.

Velarde also said the central bank was prepared to cut the country’s interest rates again this year as part of an overall package to stimulate growth.

Investor appetite for emerging market investment has been strong this year, backed by increasing commodity prices and strengthening local markets, Velarde added.

“Everything is there for the economy to start to grow,” he said. “But it requires a push and that push has to come from private investment.” (Reporting by Dion Rabouin; Editing by David Gregorio)

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