A run-off election between President Alberto Fujimori and Alejandro Toledo will be held on May 28th, and the result is too close to call. There are no significant economic policy differences between the two candidates, but whoever wins will not enjoy a congressional majority, so reforms may prove slow to pass. Fiscal policy will tighten after the election to bring the NFPS deficit down to 2% of GDP by the end of 2000. A recovery in domestic demand and private investment will help to drive growth of 4.6% in 2000 and 4.7% in 2001. Despite increased demand and a recent increase in the minimum wage, annual average inflation will remain below 4.5% as there is still spare capacity within industry. The real exchange rate will remain stable throughout the forecast period. The current-account deficit will widen in 2000 and 2001, but will start to narrow after the huge Antamina copper and zinc project comes on stream.
Key changes from last month
There will be a second-round run-off in the presidential election on May 28th, the result of which is too close to call.
First-round results show that no single party will hold an overall majority in the new Congress, which will be inaugurated on July 28th.
Economic policy outlook
No major change in economic policy outlook.
Following the signing of one part of the Camisea natural gas project, investor confidence is returning, and the EIU's economic growth forecast has been revised upwards as a result, to 4.6% in 2000 and 4.7% in 2001.