Country Report Peru May 2000 Updater

Economic forecast: Inflation

Retail price inflation will rise slightly in 2000 from the 3.7% recorded at the end of 1999, but will remain below 4.5%, as the recovery in private consumption will only be gradual and industry's spare capacity will remain high. Inflation will return to its downward trend in 2001 as a result of increasingly competitive markets and prudent monetary and fiscal policies.

The government raised the minimum wage from Ns345 (about US$100) per month to Ns410 in March 2000, but the rise will have only a limited impact on the country's overall wage levels, as three-quarters of the labour force work in the informal economy. There are few wage pressures in the private sector because of high unemployment and the weak finances of many companies, and job security will remain the overwhelming concern of workers in the forecast period.

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