New Country Reports market report from Business Monitor International: "Peru Business Forecast Report Q2 2013"

Boston, MA -- (SBWire) -- 05/27/2013 --Core Views

Significant commodity wealth, attractive investment opportunities at the sector level and a growing consumer story underpin our view that Peru will remain one of the most dynamic economies in Latin America over the medium term despite a moderation in real GDP growth.

Our view that the Chinese economy will undergo a major rebalancing in the coming years, leading to slower growth, means that we believe Peru will be hit hard via the trade and investment channels. As such, we remain below consensus on Peruvian growth in the next few years, and expect further widening of the current account deficit.

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Major Forecast Changes

Given the ongoing cyclical upswing in Chinese growth, as well as potential for a domestic stimulus programme to boost fixed investment through H113, we have revised up our 2013 real GDP growth forecast to 5.4%, from 5.2% previously.

We have revised our exchange rate outlook for Peru to reflect our view for a relatively stronger nuevo sol in the coming years. We believe that the central bank will struggle to weaken the unit in the face of relatively strong foreign direct investment inflows in the first half of the year, robust demand for the country's domestic debt and a relatively attractive carry trade. As such, we have revised our average and end-2013 exchange rate forecasts to PEN2.6200/ US$ and PEN2.6300/US$ respectively, from PEN2.6600/US$ and PEN2.6700/US$.

Key Risks To Outlook

Upside Risks To Growth Outlook: A continuation of the current upswing in Chinese economic growth into H213 could see investment and external demand remain stronger than we currently expect, boosting Peruvian economic activity and posing upside risks to our 2013 real GDP growth forecast of 5.4%.

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